Lords Grand Committee
Tuesday 10th November 2026
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11:00
11:00
Speaker 2
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Speaker 2
My Lords, I beg to move that the committee consider the Draft Terrorism Prevention and Investigation Measures Act, 2011. That continuation order of 2026, which was laid before the House on the 14th of September 2026. My Lords, this order provides for the continuation of the Secretary of State's powers under the Terrorism Prevention and Investigations Measures Act of 2011, also known as the T pin powers. The continuation is for a further five years. My Lord, I thank you. All Lords will accept it's the first duty of government to protect the public, and central to that mission is to counter the threat we face from terrorism, a threat which sadly is enduring and evolving in response, there's a range of tools, including the powers conferred on the Secretary of State by the Terrorism Prevention and Investigation Measures Act of 2011, which I well recall having shadowed the act at the time as shadow Minister for these issues.
The measures ensure that where prosecution or deportation is not possible, the Secretary of State can impose specified restrictions and requirements on an individual involved in terrorism related activity to protect the public from a risk of terrorism. A section 21 of the act states that the Secretary of State's powers will expire at the end of five years from the date the act was passed. The orders have been renewed twice in 2016 and 2021, and these powers are due to expire at the end of the 13th of December 2026. And as TPMs remain an important part of the UK's counter-terrorism toolkit, we seek to renew them today.
This power is supported by the independent reviewer of terrorism legislation, the Investigatory Powers Commissioner and the Director General of the Security Services. As my Lords will know, the Secretary of State can impose a notice on an individual if the conditions set out in section three of the act are assessed by the Secretary of State to have been met. These conditions include. The Secretary of State reasonably believes that the individual is, or has been involved in terrorism related activity, and reasonably considers that it is necessary for purposes connected with protecting members of the public from a risk of terrorism to impose such measures on the individual.
In addition, the Secretary of State has powers to extend and vary a tpim notice that is in force, and to revive a tpim notice that has been revoked. It may help noble Lords that since the introduction of the act in 2011, 33 TPMs have been imposed at the last set of published figures from June to August 2026, there are 40 pins currently in force. My Lords, these are undoubtedly restrictive measures, which is why it's right that they are used sparingly and only in exceptional cases involving individuals assessed to present the highest risks of terrorism related risk where prosecution, deportation or other disruptive measures would be insufficient to protect the public.
There are, however, stringent safeguards. The Secretary of State must be satisfied that all conditions are met and apply to the court for permission to impose a tpim notice, except in the cases of urgency. A tip notice is subject to review hearing at which court reviews the Secretary of State's decisions and the conditions were and continue to be met. The act also provides a right of appeal in relation to specified decisions taken after its imposition, and my Lords, having consulted as required by the Act, the Home Secretary has decided to make this statutory instrument to provide for the continuation of Tpim powers for a further five years, the maximum period allowable in the legislation.
We take this step because there are still sadly significant terrorist threats that we face, and it is necessary to continue upholding that first duty of government to secure the nation and keep our citizens safe. The House of Commons has considered this order, and I hope that noble Lords will also support it. Today, I vectomov.
The measures ensure that where prosecution or deportation is not possible, the Secretary of State can impose specified restrictions and requirements on an individual involved in terrorism related activity to protect the public from a risk of terrorism. A section 21 of the act states that the Secretary of State's powers will expire at the end of five years from the date the act was passed. The orders have been renewed twice in 2016 and 2021, and these powers are due to expire at the end of the 13th of December 2026. And as TPMs remain an important part of the UK's counter-terrorism toolkit, we seek to renew them today.
This power is supported by the independent reviewer of terrorism legislation, the Investigatory Powers Commissioner and the Director General of the Security Services. As my Lords will know, the Secretary of State can impose a notice on an individual if the conditions set out in section three of the act are assessed by the Secretary of State to have been met. These conditions include. The Secretary of State reasonably believes that the individual is, or has been involved in terrorism related activity, and reasonably considers that it is necessary for purposes connected with protecting members of the public from a risk of terrorism to impose such measures on the individual.
In addition, the Secretary of State has powers to extend and vary a tpim notice that is in force, and to revive a tpim notice that has been revoked. It may help noble Lords that since the introduction of the act in 2011, 33 TPMs have been imposed at the last set of published figures from June to August 2026, there are 40 pins currently in force. My Lords, these are undoubtedly restrictive measures, which is why it's right that they are used sparingly and only in exceptional cases involving individuals assessed to present the highest risks of terrorism related risk where prosecution, deportation or other disruptive measures would be insufficient to protect the public.
There are, however, stringent safeguards. The Secretary of State must be satisfied that all conditions are met and apply to the court for permission to impose a tpim notice, except in the cases of urgency. A tip notice is subject to review hearing at which court reviews the Secretary of State's decisions and the conditions were and continue to be met. The act also provides a right of appeal in relation to specified decisions taken after its imposition, and my Lords, having consulted as required by the Act, the Home Secretary has decided to make this statutory instrument to provide for the continuation of Tpim powers for a further five years, the maximum period allowable in the legislation.
We take this step because there are still sadly significant terrorist threats that we face, and it is necessary to continue upholding that first duty of government to secure the nation and keep our citizens safe. The House of Commons has considered this order, and I hope that noble Lords will also support it. Today, I vectomov.
11:04
Speaker 3
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Speaker 3
Official opposition supports this order. The Terrorism Prevention and Investigation Measures Act 2011 gives the Home Secretary powers that are needed in the small number of cases where the threat is real, but prosecution is not possible. Without this order, those powers would lapse on the 13th of December this year, continuing them until December 2031 is the responsible course of action, and we will certainly not stand in the way. I do, however, have a few questions for the noble Lord. The minister. I think he stated just now that for TPM are currently in force. I wonder how has that figure changed since the last renewal of the powers in 2021?
I appreciate he may not have those figures to hand, but more broadly, is the noble Lord the minister satisfied that the powers are being used in proportion to the threat, rather than falling into disuse? And secondly, what is the government's assessment of compliance and breaches? For instance, how often are TPM subjects found to have absconded or to have breached their conditions? And does he believe that the police and the security services are properly resourced to monitor them? But with those questions, I reiterate the support of the official opposition for this order.
I appreciate he may not have those figures to hand, but more broadly, is the noble Lord the minister satisfied that the powers are being used in proportion to the threat, rather than falling into disuse? And secondly, what is the government's assessment of compliance and breaches? For instance, how often are TPM subjects found to have absconded or to have breached their conditions? And does he believe that the police and the security services are properly resourced to monitor them? But with those questions, I reiterate the support of the official opposition for this order.
11:05
Speaker 2
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Speaker 2
I'm grateful to the noble Lord Cameron for his broad support for TPM, as they were introduced at the time when the noble Baroness May was Home Secretary. And again, I shudder at that time, and we had some concerns, some of which are around the issues that the noble Lord has mentioned, because obviously absconds are an important issue and breaches are an important issue. I can give him figures from 20 1716 TPM subjects have been prosecuted since 2017, breaching measures imposed upon them. 12 of those 16 pleaded guilty and to date three have been found guilty by a jury, and judges have imposed custodial sentences on individuals who have breached the Terrorism Prevention and Investigation measure, which I hope demonstrates both to the noble Lord and to the the committee.
The seriousness which courts take these breaches. I can also say to him that upon conclusion of any custodial sentence, the Home Secretary has the power to revive the existing TPM if it provides necessary and proportionate responses to any threat that the individual may still propose. And I think it is important that I just put on the record that the breach of a terrorism prevention order is a criminal offence. Every suspected breach is treated seriously and investigated, and we will always work with the Police and Crown Prosecution Service to support prosecutions accordingly. I did mention in my opening remarks that we have currently got four individuals on t pins.
The noble Lord will, I hope, be reassured that we do provide a quarterly update of the figures on T pins. And as I said, we've had 33 since instigation. I haven't quite got my quarterly figures in my head before the latest quarter, but the four are existing T pins on existing. And we will give an update every quarter on the numbers. To date, the Secretary of State takes these powers very seriously, and so number one has to ensure that the TPM is proportionate. And when the Secretary of State, the Home Secretary in this case, signs off that tape him, they have to have a full submission on that and full examination and will challenge back and to ensure that it is required and necessary, because, again, the appellant can appeal in court against that TPM.
So therefore a robust case is always made and self-evidently a breach or an indeed, an abscond is a serious matter. And we do provide with the TPM a significant levels of control over a range of movements and locations. And as the noble Lord will know on a number of occasions, we do remove people to new locations, so they are broken away from other influences they may have. So I would say to him that I can rest assured that when I was in his position as a shadow in the House of Commons, I asked about and was concerned about absconds and breaches.
I remain as a minister now in the government, with the Home Secretary confident that we can have a regime which is minimising those breaches. But as I've said to him in the figures I've given him, that if breaches and absconds occur, we take that extremely seriously and it will result potentially in a custodial sentence in these cases. And with those remarks, I hope I've assured the committee that the order is worthy of general support.
The seriousness which courts take these breaches. I can also say to him that upon conclusion of any custodial sentence, the Home Secretary has the power to revive the existing TPM if it provides necessary and proportionate responses to any threat that the individual may still propose. And I think it is important that I just put on the record that the breach of a terrorism prevention order is a criminal offence. Every suspected breach is treated seriously and investigated, and we will always work with the Police and Crown Prosecution Service to support prosecutions accordingly. I did mention in my opening remarks that we have currently got four individuals on t pins.
The noble Lord will, I hope, be reassured that we do provide a quarterly update of the figures on T pins. And as I said, we've had 33 since instigation. I haven't quite got my quarterly figures in my head before the latest quarter, but the four are existing T pins on existing. And we will give an update every quarter on the numbers. To date, the Secretary of State takes these powers very seriously, and so number one has to ensure that the TPM is proportionate. And when the Secretary of State, the Home Secretary in this case, signs off that tape him, they have to have a full submission on that and full examination and will challenge back and to ensure that it is required and necessary, because, again, the appellant can appeal in court against that TPM.
So therefore a robust case is always made and self-evidently a breach or an indeed, an abscond is a serious matter. And we do provide with the TPM a significant levels of control over a range of movements and locations. And as the noble Lord will know on a number of occasions, we do remove people to new locations, so they are broken away from other influences they may have. So I would say to him that I can rest assured that when I was in his position as a shadow in the House of Commons, I asked about and was concerned about absconds and breaches.
I remain as a minister now in the government, with the Home Secretary confident that we can have a regime which is minimising those breaches. But as I've said to him in the figures I've given him, that if breaches and absconds occur, we take that extremely seriously and it will result potentially in a custodial sentence in these cases. And with those remarks, I hope I've assured the committee that the order is worthy of general support.
11:09
Speaker 1
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Speaker 1
The question is that the Grand Committee has considered this instrument, as many of that opinion will say, content, content not content. The contents have it. We now have a short pause whilst we refresh the team. Thank you. Tobacco and Vapes Act 2026 display of Tobacco products consequential amendments regulations debated with one other instrument Baroness Mary.
11:15
Speaker 4
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Speaker 4
My Lords, I beg to move that the committee consider the draft the Tobacco Vapes Act 2026 age verification defence to Underage Sales England and Wales Regulations 2026 and the Draft Tobacco and Vapes Act 2026. Display of Tobacco Products Consequential Amendments Regs 2026. The Tobacco and Vapes Act, which received Royal Assent earlier this year, was landmark legislation that will deliver on the government's commitments to create a smoke free generation and tackle youth vaping. Excuse me, my Lords, as we know, smoking claims around 75,000 lives a year in the UK. That is why, from the 1st of January 2027, it will be an offence to sell tobacco products, herbal smoking products or cigarette papers to anyone born on or after the 1st January 2009.
This will help to create the UK's first smoke free generation. The Act has also strengthened protections for children by making it an offence to sell vaping products or nicotine products to anyone under the age of 18. That will close loopholes in the previous age of sale requirements. It reflects our health advice that while vapes can be effective as an aid for adult smokers to quit smoking, children and non-smokers should never vape or use nicotine products. So the two instruments that we have before committee today will support the effective implementation of the new age of sale measures in the Act.
I will begin with the Age Verification Regulations. The Act provides powers to set out in regulation steps that retailers may may take to verify that a customer has reached the legal age of sale and as a defence to the age of sale offences. This instrument, therefore sets out the steps that will satisfy this defence in England and in Wales, and it aims to give retailers confidence about how they can verify the age of customers attempting to buy these products. It also provides for two alternative methods of age verification, which will both satisfy the defence. So firstly, a person charged with an age of sale offense may rely on the defence where they can prove that they were shown a physical identity document bearing the customer's photograph, a date of birth and a holographic mark, or an ultraviolet feature.
These criteria do capture very common forms of ID such as passports, driving licence and pass cards. Secondly, a retailer may rely on a digital proof of age. This must be verified and delivered through a digital verification service known as DVS, which has been independently assessed through the UK DVS trust Framework and is listed on the statutory DVS Register. The provisions on Digital Proof of Age follow the passage of the data used in Access Act 2025 and that place the Trust Framework and the DVS register on a statutory footing. They also follow the coming into force of the Licensing Act 2003 Mandatory Licensing Conditions Amendment Order 2026, which enables the use of these services as part of alcohol sales.
So let me be clear there is no requirement for individuals to use digital proof of age, nor a businesses required to accept it. It simply provides an additional voluntary option alongside physical documents. So, my Lords, in developing the criteria for physical and digital proof of age, we have considered three key aims. Firstly, we have sought to mirror the criteria for physical and digital proofs of age that can be used for alcohol sales, something we discussed, and rightly so, at committee stage. And this aims to capture that. Where many retailers sell alcohol as well as tobacco, vaping and nicotine products, they will only need to remember one set of criteria.
The second aim is that the criteria ensures that a range of commonly used forms of ID can be accepted. And the third aim is that we have sought to future proof the regs by ensuring that digital proof of age can be used alongside traditional physical documents. In other words, we are seeking to make this workable. My Lords, neither the act nor these regulations create a requirement for retailers to ask every customer for proof of age before every sale. The steps set out in this instrument are also not the only means of establishing a defence. The act provides a an alternative defence where a retailer can prove that they took, and I quote, all reasonable steps to avoid committing the offence.
This is very much a re-enactment of the defence in previous tobacco and vape legislation, of having taken all reasonable precautions and exercised all due diligence. These regulations set out an additional, more prescriptive route to establishing defence. A retailer who follows the steps in these regulations can have confidence that they will be able to demonstrate a statutory defence if they were ever subsequently challenged over a sale. Again, a matter that arose correctly during committee stage, my Lords. The next statutory instrument I will refer to now , and it relates to the display of tobacco products in retail premises.
Under the current rules introduced by the Tobacco Advertising and Promotion Act 2002 and related regulations, retailers in England, Wales and Northern Ireland are prohibited from displaying tobacco products. The 2002 act includes an exemption that allows retailers to display tobacco products to a customer aged 18 or over on their request, and a link defence, where a retailer mistakenly displays products to someone that they reasonably considered to be 18 or over. This statutory instrument updates these provisions so that tobacco products can only be displayed on request to people born before the 1st of January 2009, aligning display restrictions with the new age of sale that comes into force on the 1st of January.
Without these amendments, my Lords, under the current display legislation, individuals aged 18 and over could still be shown tobacco products even if the products could not be legally sold to them. This would undoubtedly create an inconsistent and very confusing position for retailers, and could increase the sale, or could increase the risk of accidental underage sales. By aligning the age at which customers can be shown tobacco products with the new age of sale, we are. We are aiming to help businesses to comply with the law and to support effective enforcement. These changes also aim to ensure the continued effectiveness of restrictions on tobacco display.
We have decades of evidence that have shown that reducing the visibility and the accessibility of tobacco products does help to reduce their appeal, particularly amongst young people. Restrictions on display also contribute to a more supportive environment for adults who are trying to quit smoking . By reducing exposure to tobacco products in everyday settings. These regulations mark what I believe to be an important milestone in the implementation of the Tobacco and Vapes Act. They are, my Lords, a step forward towards creating a healthier future for today's children and for generations to come. And I commend them to the committee.
This will help to create the UK's first smoke free generation. The Act has also strengthened protections for children by making it an offence to sell vaping products or nicotine products to anyone under the age of 18. That will close loopholes in the previous age of sale requirements. It reflects our health advice that while vapes can be effective as an aid for adult smokers to quit smoking, children and non-smokers should never vape or use nicotine products. So the two instruments that we have before committee today will support the effective implementation of the new age of sale measures in the Act.
I will begin with the Age Verification Regulations. The Act provides powers to set out in regulation steps that retailers may may take to verify that a customer has reached the legal age of sale and as a defence to the age of sale offences. This instrument, therefore sets out the steps that will satisfy this defence in England and in Wales, and it aims to give retailers confidence about how they can verify the age of customers attempting to buy these products. It also provides for two alternative methods of age verification, which will both satisfy the defence. So firstly, a person charged with an age of sale offense may rely on the defence where they can prove that they were shown a physical identity document bearing the customer's photograph, a date of birth and a holographic mark, or an ultraviolet feature.
These criteria do capture very common forms of ID such as passports, driving licence and pass cards. Secondly, a retailer may rely on a digital proof of age. This must be verified and delivered through a digital verification service known as DVS, which has been independently assessed through the UK DVS trust Framework and is listed on the statutory DVS Register. The provisions on Digital Proof of Age follow the passage of the data used in Access Act 2025 and that place the Trust Framework and the DVS register on a statutory footing. They also follow the coming into force of the Licensing Act 2003 Mandatory Licensing Conditions Amendment Order 2026, which enables the use of these services as part of alcohol sales.
So let me be clear there is no requirement for individuals to use digital proof of age, nor a businesses required to accept it. It simply provides an additional voluntary option alongside physical documents. So, my Lords, in developing the criteria for physical and digital proof of age, we have considered three key aims. Firstly, we have sought to mirror the criteria for physical and digital proofs of age that can be used for alcohol sales, something we discussed, and rightly so, at committee stage. And this aims to capture that. Where many retailers sell alcohol as well as tobacco, vaping and nicotine products, they will only need to remember one set of criteria.
The second aim is that the criteria ensures that a range of commonly used forms of ID can be accepted. And the third aim is that we have sought to future proof the regs by ensuring that digital proof of age can be used alongside traditional physical documents. In other words, we are seeking to make this workable. My Lords, neither the act nor these regulations create a requirement for retailers to ask every customer for proof of age before every sale. The steps set out in this instrument are also not the only means of establishing a defence. The act provides a an alternative defence where a retailer can prove that they took, and I quote, all reasonable steps to avoid committing the offence.
This is very much a re-enactment of the defence in previous tobacco and vape legislation, of having taken all reasonable precautions and exercised all due diligence. These regulations set out an additional, more prescriptive route to establishing defence. A retailer who follows the steps in these regulations can have confidence that they will be able to demonstrate a statutory defence if they were ever subsequently challenged over a sale. Again, a matter that arose correctly during committee stage, my Lords. The next statutory instrument I will refer to now , and it relates to the display of tobacco products in retail premises.
Under the current rules introduced by the Tobacco Advertising and Promotion Act 2002 and related regulations, retailers in England, Wales and Northern Ireland are prohibited from displaying tobacco products. The 2002 act includes an exemption that allows retailers to display tobacco products to a customer aged 18 or over on their request, and a link defence, where a retailer mistakenly displays products to someone that they reasonably considered to be 18 or over. This statutory instrument updates these provisions so that tobacco products can only be displayed on request to people born before the 1st of January 2009, aligning display restrictions with the new age of sale that comes into force on the 1st of January.
Without these amendments, my Lords, under the current display legislation, individuals aged 18 and over could still be shown tobacco products even if the products could not be legally sold to them. This would undoubtedly create an inconsistent and very confusing position for retailers, and could increase the sale, or could increase the risk of accidental underage sales. By aligning the age at which customers can be shown tobacco products with the new age of sale, we are. We are aiming to help businesses to comply with the law and to support effective enforcement. These changes also aim to ensure the continued effectiveness of restrictions on tobacco display.
We have decades of evidence that have shown that reducing the visibility and the accessibility of tobacco products does help to reduce their appeal, particularly amongst young people. Restrictions on display also contribute to a more supportive environment for adults who are trying to quit smoking . By reducing exposure to tobacco products in everyday settings. These regulations mark what I believe to be an important milestone in the implementation of the Tobacco and Vapes Act. They are, my Lords, a step forward towards creating a healthier future for today's children and for generations to come. And I commend them to the committee.
11:24
11:24
Speaker 5
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Speaker 5
My Lords, may I apologise for missing the first 90s of the Minister's speech? The time it took me to from my room to the Committee corridor. I am grateful to the noble lady for her lengthy explanation, which has enabled me to get my breath back as she. As she explained, these follow from the Tobacco and Vape Act, which is a long standing member of the Appg on smoking and health. I have supported an act which actually carried forward a policy started by the previous conservative government. As the noble lady has said, the first s I is relatively simple.
It ensures that tobacco products which cannot be displayed in shops, are not shown to anyone who is not old enough to be sold them. So, as Noble Lady said that anyone born after the 2007 . Moving on, the government recently closed a consultation on extending point of sale restrictions to nicotine products. Now this is actually overdue. The display of addictive vapes in plain view of children has helped to increase youth usage and has undermined their essential role as primarily a smoking cessation aid. I was interested to see the coverage in the BMJ regarding large amounts of industry lobbying around the consultation.
Of course, this is nothing new, as those of us who have been working on this issue for a long time can can tell. This is then followed by another story about how AI bots flooded the initial consultation on the tobacco and vape spill in 2023. Of the 118,756 responses received, 90,835. 7 to 6% were submitted by bots. If one looks at the comment by the DHS, it said this. The submissions were, I quote, often duplicated many times and sent at high frequency from a small number of IP addresses. Now this bombardment appears to be the first documented instance of large scale automated interference in a formal public health policy consultation.
Now, we know that the tobacco industry will often work with or through other organisations, third parties or proxies to fight regulation. For example, there is a website C talk, dedicated to independent retailers, convenience stores and high street businesses. Campaign materials on this site relevant to the consultation exercise appear to have been written by somebody who completed an internship at British American Tobacco, and Paul Shima, the co-founder founder of the site, has recently received awards prizes sponsored by Imperial Tobacco and has also appeared in an advertisement for another tobacco company, JTI. I think that is a concerning relationship.
My Lords consultations are not referendums. They are there to gather evidence, information and views. But where responses come from does matter when it comes to tobacco, responses should be driven by public health, not commercial interests. In order to drive decision making , to protect our population from the harms done by these lethal products. The second instrument outlines what defence is accepted for retailers when it comes to verifying age, making it clear that either physical or digital ID must be checked. Whilst the mention of digital ID may set alarm bells ringing for some. Given previous plans to mandate digital ID for workers in the UK, I actually think this is fair, ensuring that this is an option for consumers and mirrors what has already been introduced for alcohol.
It makes sense that we make the identification process as seamless as possible. Now these regulations about ensuring we are ready ahead of January the 1st. There will be many more to come, and we've recently seen many announcements relating to vape shops from other government departments, such as the need for planning and the removal of business rate relief. Now, it's important that we don't encourage that sort of shops and behaviours that we are seeking to resolve, so I welcome those initiatives. Finally, the minister will recall the pressure as the bill went through for a roadmap showing how smoking rates will be reduced, having some milestones and ensuring that vaping policies are part of a broader part of a tobacco control plan.
The government resisted this, but I would be keen to hear when the noble lady winds up, what type of evidence is being gathered to judge the success of the act, alongside other government policies on tobacco and vaping?
It ensures that tobacco products which cannot be displayed in shops, are not shown to anyone who is not old enough to be sold them. So, as Noble Lady said that anyone born after the 2007 . Moving on, the government recently closed a consultation on extending point of sale restrictions to nicotine products. Now this is actually overdue. The display of addictive vapes in plain view of children has helped to increase youth usage and has undermined their essential role as primarily a smoking cessation aid. I was interested to see the coverage in the BMJ regarding large amounts of industry lobbying around the consultation.
Of course, this is nothing new, as those of us who have been working on this issue for a long time can can tell. This is then followed by another story about how AI bots flooded the initial consultation on the tobacco and vape spill in 2023. Of the 118,756 responses received, 90,835. 7 to 6% were submitted by bots. If one looks at the comment by the DHS, it said this. The submissions were, I quote, often duplicated many times and sent at high frequency from a small number of IP addresses. Now this bombardment appears to be the first documented instance of large scale automated interference in a formal public health policy consultation.
Now, we know that the tobacco industry will often work with or through other organisations, third parties or proxies to fight regulation. For example, there is a website C talk, dedicated to independent retailers, convenience stores and high street businesses. Campaign materials on this site relevant to the consultation exercise appear to have been written by somebody who completed an internship at British American Tobacco, and Paul Shima, the co-founder founder of the site, has recently received awards prizes sponsored by Imperial Tobacco and has also appeared in an advertisement for another tobacco company, JTI. I think that is a concerning relationship.
My Lords consultations are not referendums. They are there to gather evidence, information and views. But where responses come from does matter when it comes to tobacco, responses should be driven by public health, not commercial interests. In order to drive decision making , to protect our population from the harms done by these lethal products. The second instrument outlines what defence is accepted for retailers when it comes to verifying age, making it clear that either physical or digital ID must be checked. Whilst the mention of digital ID may set alarm bells ringing for some. Given previous plans to mandate digital ID for workers in the UK, I actually think this is fair, ensuring that this is an option for consumers and mirrors what has already been introduced for alcohol.
It makes sense that we make the identification process as seamless as possible. Now these regulations about ensuring we are ready ahead of January the 1st. There will be many more to come, and we've recently seen many announcements relating to vape shops from other government departments, such as the need for planning and the removal of business rate relief. Now, it's important that we don't encourage that sort of shops and behaviours that we are seeking to resolve, so I welcome those initiatives. Finally, the minister will recall the pressure as the bill went through for a roadmap showing how smoking rates will be reduced, having some milestones and ensuring that vaping policies are part of a broader part of a tobacco control plan.
The government resisted this, but I would be keen to hear when the noble lady winds up, what type of evidence is being gathered to judge the success of the act, alongside other government policies on tobacco and vaping?
11:29
Speaker 6
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Speaker 6
My Lords, these two statutory instruments are essential stepping stones towards a historic milestone in public health. They'll help to enable the smoke free generation policy to come into legal effect on the 1st of January 2027, but they are not about reopening the principle of the rising age of sale, and which both houses voted decisively in favour of. We now need to implement the policy as effectively as possible. I was a strong supporter of previous legislation prohibiting retail stores from displaying tobacco products openly to the public. Tobacco products can, as the Minister suggested, only be shown once a customer's age has been verified as being 18 or over.
So I agree with her that the instrument before us sensibly updates those rules to reflect the forthcoming changes to the age of sale. They will help to ensure that lethal products are never displayed to anyone who cannot legally be sold them. The government is also at this time proposing point of sale restrictions for nicotine products, such as vapes and nicotine pouches. For too long, we've seen brightly coloured nicotine products designed to be attractive to young people displayed child height near shop counters. The indiscriminate promotion of these products must stop, so I welcome the proposal to store nicotine products separately so the customers buying them are not inadvertently exposed to tobacco displays.
We need to recognise a problem with perception as we seek to promote switching from smoking tobacco to using vapes instead. Action on smoking and health has shown that 54% of UK adults and 52% of current smokers mistakenly believe that vaping is as harmful or more harmful than smoking tobacco. Most significantly, among smokers who've never tried vaping, that figure rises to 61%. I was a very early supporter of legislation promoting vapes or e-cigarettes, as they were then called, as a means of quitting tobacco. But now we have to balance very carefully how vapes are promoted. We want to clamp down on their appeal to young people, and at the same time, we want to ensure that these restrictions on promoting vapes did not inadvertently worsen public misconceptions about, about, among, about, amongst adult smokers.
We need smokers, most of whom want to quit, to understand that switching to vaping can really help them, and that the vaping products are less harmful. So I would be grateful if the noble lady, the Minister, can explain how nicotine product point of sale restrictions will be designed so they do not entrench dangerous misconceptions about their relative harm compared to tobacco products. Please also say if there will be scope for improved public health messaging, such as swap to stop on covered retail units. The second instrument concerns the legal defences available to retailers when verifying a customer's age.
It provides clarity by accepting both physical and digital forms of identification. Responsible retailers who know their regular customers can continue to serve them without unnecessary friction. Data from ash shows that 41% of 11 to 17 year olds, smokers and 47% of children who currently purchase products directly from retail shops. Furthermore, it shows that 71% of retailers in England and Wales actively support mandatory age verification, with only 20% of them opposed to it. Titer verification is urgently needed and responsible retailers want to do the right thing. So can I ask the Minister what detailed guidance would be published to explain what these changes mean in practice for shopkeepers operating challenge 25 schemes as we approach January the 1st, leadership and clear communication from central government will be decisive in making the policy work and helping us to move further towards the smoke free generation that we are seeking.
Retailers and local councils are doing their part. Perhaps the noble lady, the Minister, can tell us more about the government's national public awareness campaign and when it will launch. If we combine clear regulations, evidence led public health messaging and dedicated support for our frontline retailers, we can ensure that January the 1st, 2027 marks the true beginning of the end for the tobacco epidemic in this country. Finally, I'd just like to share the concerns of the noble Lord, Lord Young of Cookham when it comes to the relationship between tobacco companies and See talk and the Protect Your Store campaign, the tobacco industry often uses proxies to circumvent restrictions in place to prevent them from influencing health policy, but those restrictions are there for a very good reason.
Retailers and ready to implement this important life saving policy . And evidence shows that when consumers spend their money on things other than tobacco, it is good for the UK economy. I look forward to the minister's response.
So I agree with her that the instrument before us sensibly updates those rules to reflect the forthcoming changes to the age of sale. They will help to ensure that lethal products are never displayed to anyone who cannot legally be sold them. The government is also at this time proposing point of sale restrictions for nicotine products, such as vapes and nicotine pouches. For too long, we've seen brightly coloured nicotine products designed to be attractive to young people displayed child height near shop counters. The indiscriminate promotion of these products must stop, so I welcome the proposal to store nicotine products separately so the customers buying them are not inadvertently exposed to tobacco displays.
We need to recognise a problem with perception as we seek to promote switching from smoking tobacco to using vapes instead. Action on smoking and health has shown that 54% of UK adults and 52% of current smokers mistakenly believe that vaping is as harmful or more harmful than smoking tobacco. Most significantly, among smokers who've never tried vaping, that figure rises to 61%. I was a very early supporter of legislation promoting vapes or e-cigarettes, as they were then called, as a means of quitting tobacco. But now we have to balance very carefully how vapes are promoted. We want to clamp down on their appeal to young people, and at the same time, we want to ensure that these restrictions on promoting vapes did not inadvertently worsen public misconceptions about, about, among, about, amongst adult smokers.
We need smokers, most of whom want to quit, to understand that switching to vaping can really help them, and that the vaping products are less harmful. So I would be grateful if the noble lady, the Minister, can explain how nicotine product point of sale restrictions will be designed so they do not entrench dangerous misconceptions about their relative harm compared to tobacco products. Please also say if there will be scope for improved public health messaging, such as swap to stop on covered retail units. The second instrument concerns the legal defences available to retailers when verifying a customer's age.
It provides clarity by accepting both physical and digital forms of identification. Responsible retailers who know their regular customers can continue to serve them without unnecessary friction. Data from ash shows that 41% of 11 to 17 year olds, smokers and 47% of children who currently purchase products directly from retail shops. Furthermore, it shows that 71% of retailers in England and Wales actively support mandatory age verification, with only 20% of them opposed to it. Titer verification is urgently needed and responsible retailers want to do the right thing. So can I ask the Minister what detailed guidance would be published to explain what these changes mean in practice for shopkeepers operating challenge 25 schemes as we approach January the 1st, leadership and clear communication from central government will be decisive in making the policy work and helping us to move further towards the smoke free generation that we are seeking.
Retailers and local councils are doing their part. Perhaps the noble lady, the Minister, can tell us more about the government's national public awareness campaign and when it will launch. If we combine clear regulations, evidence led public health messaging and dedicated support for our frontline retailers, we can ensure that January the 1st, 2027 marks the true beginning of the end for the tobacco epidemic in this country. Finally, I'd just like to share the concerns of the noble Lord, Lord Young of Cookham when it comes to the relationship between tobacco companies and See talk and the Protect Your Store campaign, the tobacco industry often uses proxies to circumvent restrictions in place to prevent them from influencing health policy, but those restrictions are there for a very good reason.
Retailers and ready to implement this important life saving policy . And evidence shows that when consumers spend their money on things other than tobacco, it is good for the UK economy. I look forward to the minister's response.
11:35
11:35
Speaker 7
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Speaker 7
The Minister for introducing this item for her turning up this morning. She's clearly under the weather. Perhaps she'd have a hot toddy and take a rest for the rest of the day, given that she'll be in her place at the despatch box tomorrow evening for the health Bill Committee stage. Protecting young people from the harms of smoking and vaping is the principle underpinning both these measures. But it is essential that the regulations implementing implementing these changes are practical and properly scrutinised. The first instrument I will address today concerns the display of tobacco products, aligning existing exemptions with the new generational ban.
At first glance, this appears to be a straightforward change. However, it raises wider questions about the cumulative burden being placed on retailers. The government's own impact assessment estimates that the changes to vape displays could cost retailers 26 million. The Association of Convenience Stores has suggested that the costs of a full display ban could actually exceed £160 million for convenience stores alone. These figures demonstrate the substantial financial pressures facing businesses as a result of these reforms. Can the noble Baroness, the Minister, therefore clarify what assessment has been made of the specific costs associated with implementing this instrument, particularly for small independent retailers?
What assurances can provide the businesses will receive sufficient time and guidance to adapt. An instrument sets out the steps retailers must take a customer's age when selling tobacco or vaping products, so that they can demonstrate that they have followed the law if an underage sale takes place. These provisions follow on from the fact that the generational ban introduces a fundamental, different approach to age verification. Rather than simply establishing whether someone is over 18, retailers will need to determine whether customers were born before a particular date, namely before 2009. This creates additional complexity for shopkeepers and their employees, who will be expected to understand and enforce the law.
The government must ensure that those acting responsibly are not inadvertently exposed to prosecution because of unclear requirements. Can the noble Baroness, the Minister, explain how the government will ensure that retailers can reliably check without whether a customer is legally entitled to buy tobacco, particularly at the age limit, will change each year. What expectations are there for people to carry identification as they get older? My Lords, during the passage of the Tobacco and Vapes Bill, concerns were raised about the extensive powers given to the Secretary of State. Concerns have been repeatedly raised about the breadth of the government's regulation making powers and the importance of parliamentary scrutiny.
It is therefore vital that these powers are exercised transparently, with clear evidence supporting the measures introduced. Can the noble Baroness, the Minister, tell us how the government expects Trading Standards officers to enforce these additional requirements without providing them the resources to do so? As my noble friend Doctor Caroline Johnson highlighted in the other place, these powers could allow the government to extend smoke free restrictions to a wide range of places with limited parliamentary oversight. While these Sis deal particularly with tobacco displays and age verification, wider concerns about scrutiny remains. Can the noble Baroness, the Minister, reassure this House that future regulations will be subject to proper consultation and parliamentary scrutiny, and that the government will clearly explain why further restrictions are necessary?
I hope the noble Baroness, the Minister, will address these concerns and reassure the House that these regulations will be implemented fairly and scrutinised properly.
At first glance, this appears to be a straightforward change. However, it raises wider questions about the cumulative burden being placed on retailers. The government's own impact assessment estimates that the changes to vape displays could cost retailers 26 million. The Association of Convenience Stores has suggested that the costs of a full display ban could actually exceed £160 million for convenience stores alone. These figures demonstrate the substantial financial pressures facing businesses as a result of these reforms. Can the noble Baroness, the Minister, therefore clarify what assessment has been made of the specific costs associated with implementing this instrument, particularly for small independent retailers?
What assurances can provide the businesses will receive sufficient time and guidance to adapt. An instrument sets out the steps retailers must take a customer's age when selling tobacco or vaping products, so that they can demonstrate that they have followed the law if an underage sale takes place. These provisions follow on from the fact that the generational ban introduces a fundamental, different approach to age verification. Rather than simply establishing whether someone is over 18, retailers will need to determine whether customers were born before a particular date, namely before 2009. This creates additional complexity for shopkeepers and their employees, who will be expected to understand and enforce the law.
The government must ensure that those acting responsibly are not inadvertently exposed to prosecution because of unclear requirements. Can the noble Baroness, the Minister, explain how the government will ensure that retailers can reliably check without whether a customer is legally entitled to buy tobacco, particularly at the age limit, will change each year. What expectations are there for people to carry identification as they get older? My Lords, during the passage of the Tobacco and Vapes Bill, concerns were raised about the extensive powers given to the Secretary of State. Concerns have been repeatedly raised about the breadth of the government's regulation making powers and the importance of parliamentary scrutiny.
It is therefore vital that these powers are exercised transparently, with clear evidence supporting the measures introduced. Can the noble Baroness, the Minister, tell us how the government expects Trading Standards officers to enforce these additional requirements without providing them the resources to do so? As my noble friend Doctor Caroline Johnson highlighted in the other place, these powers could allow the government to extend smoke free restrictions to a wide range of places with limited parliamentary oversight. While these Sis deal particularly with tobacco displays and age verification, wider concerns about scrutiny remains. Can the noble Baroness, the Minister, reassure this House that future regulations will be subject to proper consultation and parliamentary scrutiny, and that the government will clearly explain why further restrictions are necessary?
I hope the noble Baroness, the Minister, will address these concerns and reassure the House that these regulations will be implemented fairly and scrutinised properly.
11:39
Speaker 4
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Speaker 4
My Lords, I'm most grateful to all noble Lords who contributed to this debate and also for the support for the measures that we are taking. And I know that many noble Lords who have spoken today have long been active campaigners, and I'm extremely grateful. And the noble Lord, Lord young, particularly welcomed the various steps across government. And I think that does speak to the fact that this is not just a matter for health, but there are other actions we can take. And I'm also glad that the noble Lord, Lord Rennard, welcomed the clarity that these regulations will provide, and referred to avoiding unnecessary friction.
I think that was very much part of what we have discussed in the passage of the Bill, and indeed, what I think one of the concerns the noble Lord, Lord Evans, is too. And we share that. But what it does mean is that in just seven weeks time, the smoke free generation will become a reality in this country. And I think that is something to celebrate, because the first young people born in 2009 will turn 18. The law will change, and those young people will enjoy a life that's free from the harms of tobacco , that have plagued the successive generations before them, and these two sets of regulations, and are important steps in making sure that retailers are ready.
And I do take on board the concerns that are raised. The law is consistent, and the new age of sale does need to be implemented successfully from the 1st of January, and that is what these regulations seek to do. So turning to the points raised, the noble Lord, Lord young and the noble Lord. Lord Rennard raised questions about tobacco industry influence and input into consultations. Just to remind the committee our consultation on proposals to reduce the appeal of tobacco, vaping and nicotine products did close on the 2nd of October, and the consultation spoke to aligning the display of vaping products, nicotine products, cigarette papers, heated tobacco devices with display restrictions in other words, that they can be removed from display and away from the eyes of children and young people.
And we're currently considering the responses. So on concerns about interference, as have been raised, we do have robust controls in place to prevent the manipulation of public consultations, and these controls certainly did work effectively in our past consultation, where we set out the case to create a smoke free generation. But I can assure noble Lords that we absolutely remain alert to interference of the kind. The noble Lord, Lord young, particularly raised, and we are not going to be deterred from doing what is necessary to promote healthier living and to protect children and young people. Noble Lord, Lord young raised a question about a road map.
We do very much share, of course, the ambition to drive down smoking rates further. We're far from complacent, and I know how pleased the chief medical officer was recently at what was a historic low in terms of smoking rates. But we don't stop there. We will continue. But our immediate priority, of course, is developing the Is to delivering the Tobacco and Vapes Act, and also what is a very comprehensive programme of secondary legislation that sits behind it. So with that and investment in stop smoking services and enforcement, these measures will form our programme for delivering a smoke free UK.
It might be helpful if I remind the committee that the act does include a requirement for the Secretary of State to review the operation of the act within 4 to 7 years of Royal Assent , and to lay a report before Parliament concluding the findings of this review. So I can assure noble Lords that we do remain being very open to evaluating the impact of the act and also being held to account on that. And I do remember the conversation about what the right length of time was, and this is our feeling on the right length of time, in order that we can give the act time to make an impact and be realistic with Parliament about what has been achieved.
And the noble Lord, Lord Rennard, asked about the practical impact on retailers who operate the challenge 25 scheme and the noble Lord, Lord Evans also asked about advice to retailers. So I can confirm that we have published guidance retailers on the changes coming into force and that will be updated to reflect the age verification defence in these regulations, subject, of course, to parliamentary approval. And perhaps the broader point is that we continue and will always continue to engage with retailers to help ensure that they are aware of the changes and what they need to do.
They are very much part of the solution and we have welcomed their commitment to working with us on on challenge 25 for vaping and nicotine products. The age of sale will be 18 and over. So of course, challenge 25 will continue to be a very useful tool in the box. And we'll we will continue to encourage its use. The noble Lord, Lord Evans asked about costs and expressed concerns about cumulative burden. The impact assessment of the Act did consider the cost of age verification under the new Age of Sale regime. The explanatory memorandum for this instrument does cover our assessment of additional indirect costs to businesses of digital elements.
These are indirect costs I must emphasize, because, of course, as I mentioned in my opening comments, the use of digital verification services is entirely voluntary. To the noble Lord, Lord Rennard. I know he will be pleased that just next Monday we will be launching a nationwide communications campaign to support public awareness of the age of sale changes that come into force on the 1st of January, and that will include content across a range of platforms, including TV, radio and social media. And back to the point raised by the noble Lord, Lord Evans, about expectations on retailers.
Our message to retailers is very clear that if they are not sure that a customer was born before the 1st of January 2009, they should verify, verify their age and we do expect trading standards to continue to take a proportionate approach to enforcement and consider the specific circumstances of each case. So, my Lords, once again, I thank Noble Lords for their contributions and their support, both in the passage of the Bill, but also today. And I look forward to us becoming that smoke free generation.
I think that was very much part of what we have discussed in the passage of the Bill, and indeed, what I think one of the concerns the noble Lord, Lord Evans, is too. And we share that. But what it does mean is that in just seven weeks time, the smoke free generation will become a reality in this country. And I think that is something to celebrate, because the first young people born in 2009 will turn 18. The law will change, and those young people will enjoy a life that's free from the harms of tobacco , that have plagued the successive generations before them, and these two sets of regulations, and are important steps in making sure that retailers are ready.
And I do take on board the concerns that are raised. The law is consistent, and the new age of sale does need to be implemented successfully from the 1st of January, and that is what these regulations seek to do. So turning to the points raised, the noble Lord, Lord young and the noble Lord. Lord Rennard raised questions about tobacco industry influence and input into consultations. Just to remind the committee our consultation on proposals to reduce the appeal of tobacco, vaping and nicotine products did close on the 2nd of October, and the consultation spoke to aligning the display of vaping products, nicotine products, cigarette papers, heated tobacco devices with display restrictions in other words, that they can be removed from display and away from the eyes of children and young people.
And we're currently considering the responses. So on concerns about interference, as have been raised, we do have robust controls in place to prevent the manipulation of public consultations, and these controls certainly did work effectively in our past consultation, where we set out the case to create a smoke free generation. But I can assure noble Lords that we absolutely remain alert to interference of the kind. The noble Lord, Lord young, particularly raised, and we are not going to be deterred from doing what is necessary to promote healthier living and to protect children and young people. Noble Lord, Lord young raised a question about a road map.
We do very much share, of course, the ambition to drive down smoking rates further. We're far from complacent, and I know how pleased the chief medical officer was recently at what was a historic low in terms of smoking rates. But we don't stop there. We will continue. But our immediate priority, of course, is developing the Is to delivering the Tobacco and Vapes Act, and also what is a very comprehensive programme of secondary legislation that sits behind it. So with that and investment in stop smoking services and enforcement, these measures will form our programme for delivering a smoke free UK.
It might be helpful if I remind the committee that the act does include a requirement for the Secretary of State to review the operation of the act within 4 to 7 years of Royal Assent , and to lay a report before Parliament concluding the findings of this review. So I can assure noble Lords that we do remain being very open to evaluating the impact of the act and also being held to account on that. And I do remember the conversation about what the right length of time was, and this is our feeling on the right length of time, in order that we can give the act time to make an impact and be realistic with Parliament about what has been achieved.
And the noble Lord, Lord Rennard, asked about the practical impact on retailers who operate the challenge 25 scheme and the noble Lord, Lord Evans also asked about advice to retailers. So I can confirm that we have published guidance retailers on the changes coming into force and that will be updated to reflect the age verification defence in these regulations, subject, of course, to parliamentary approval. And perhaps the broader point is that we continue and will always continue to engage with retailers to help ensure that they are aware of the changes and what they need to do.
They are very much part of the solution and we have welcomed their commitment to working with us on on challenge 25 for vaping and nicotine products. The age of sale will be 18 and over. So of course, challenge 25 will continue to be a very useful tool in the box. And we'll we will continue to encourage its use. The noble Lord, Lord Evans asked about costs and expressed concerns about cumulative burden. The impact assessment of the Act did consider the cost of age verification under the new Age of Sale regime. The explanatory memorandum for this instrument does cover our assessment of additional indirect costs to businesses of digital elements.
These are indirect costs I must emphasize, because, of course, as I mentioned in my opening comments, the use of digital verification services is entirely voluntary. To the noble Lord, Lord Rennard. I know he will be pleased that just next Monday we will be launching a nationwide communications campaign to support public awareness of the age of sale changes that come into force on the 1st of January, and that will include content across a range of platforms, including TV, radio and social media. And back to the point raised by the noble Lord, Lord Evans, about expectations on retailers.
Our message to retailers is very clear that if they are not sure that a customer was born before the 1st of January 2009, they should verify, verify their age and we do expect trading standards to continue to take a proportionate approach to enforcement and consider the specific circumstances of each case. So, my Lords, once again, I thank Noble Lords for their contributions and their support, both in the passage of the Bill, but also today. And I look forward to us becoming that smoke free generation.
11:48
Speaker 6
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Speaker 6
For the noble lady. The minister sits down and can I say a little bit more about this promotional campaign beginning on Monday? What I'd really be interested to know is what's the budget for this campaign? Because I'm delighted it'll appear on television, radio, social media, elsewhere. These things cost, and I'd like to know how much might be invested in this programme. Or perhaps you could let me know another time.
11:48
11:48
Speaker 1
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Speaker 1
The question is that the Grand Committee has considered this instrument, as many of that opinion will say, content, content not content. The contents have it now. The Tobacco and Vapes Act 2026. Age verification Defence to Underage Sales England and Wales Regulations 2026. And I want to move formally.
11:49
11:49
11:49
11:49
11:49
11:49
11:49
11:49
11:50
11:50
11:50
11:50
11:50
11:50
11:50
Speaker 1
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Speaker 1
Order. Order! The committee will now adjourn, just for a couple of minutes. Allow the front benches to change. Financial Services and Markets Act 2000 Cryptoassets Miscellaneous Amendments Regulations 2026 debated with one other instrument. Lord Wolfson said to. Thank you, chairman. I beg to move. The committee considered two statutory instruments. First of all, my Lords, I think it's fair to say financial services are a key driver of growth in the United Kingdom. Embracing innovation is essential if we are to maintain our position as a leading global financial centre, particularly in relation to tokenization, digital assets and the technologies underpinning new forms of payments, trading and market infrastructure.
I turn first to the Financial Services and Markets Act 2000 Cryptoassets Miscellaneous Amendments Regulations 2026. As Noble Lords will know, earlier this year, the government legislated to establish a financial services regulatory regime for crypto assets, including stablecoins. That framework gives firms the certainty they need to invest and innovate in the UK, while ensuring appropriate protections for consumers and markets. The instrument before the committee today makes a number of targeted amendments to that regime. It does not replace the regime already approved by parliament, but ensures that it operates as intended, remains proportionate and supports a competitive UK market.
As this sector develops. In particular, it ensures that requirements designed for crypto asset trading do not apply disproportionately to the use of appropriately regulated, UK issued stablecoins for payments. The government considers that stablecoins issued in the UK , appropriately regulated to ensure they are truly stable, could play a significant role in both retail and wholesale payments. The government is currently consulting on wider reforms to payments regulation to accommodate tokenized payments, including stablecoins. Without these amendments, firms using UK issued qualifying stablecoins in payment chains could be captured by crypto asset regulatory activities designed primarily for trade. It would therefore be disproportionate to require firms using UK issued qualifying stablecoins in payment chains to secure permissions under the Cryptoasset regime, now only to require further permissions under the Future Payments Framework.
This instrument therefore excludes UK issued qualifying stablecoins from the crypto asset dealing and arrangement activities, arranging activities, lending and borrowing involving those stablecoins will remain regulated given the different risks those activities can present. It also excludes the temporary holding of those stablecoins in connection with a payment transaction from the crypto asset safeguarding activity. This is therefore about ensuring the right regulation applies to the right activity, rather than removing stablecoin activity from regulation. Alongside this principal change, other amendments clarify the regulatory perimeter for stablecoin issuance and backing asset arrangements. They also bring forward the commencement of provisions, clarifying that qualifying stablecoin assets are not treated as collective investment schemes or alternative investment funds, and that neither qualifying stablecoins nor the assets backing them are electronic money.
These changes are aimed at removing barriers to stablecoin adoption for different use cases ahead of the crypto asset regime coming fully into force in October 2027. Acting now provides clarity before firms need to comply with the new regime. The instruments also introduces targeted exclusions for certain proprietary trading and marketing , market making activities, technical service providers, and certain central securities depository arrangements. And finally, it makes corresponding amendments to the financial promotions regime to ensure that the perimeter remains aligned with the crypto asset regime. Following extensive engagement with parliamentarians and industry, these amendments provide greater certainty and remove unintended barriers , while retaining appropriate protections for consumers and market integrity.
My Lords, I will turn now to the Draft Financial Services and Markets Act 2023 edition of relevant Enactments regulations 2026. The Financial Services and Markets Act 2023 give the Treasury powers to establish financial market infrastructures The Financial Services and Markets Act 2023, give the Treasury powers to establish financial market infrastructures or fmi's sandboxes. These sandboxes allow new technologies to be tested in financial markets within a modified legislative framework, where requirements might otherwise impede innovation. The powers were designed to be flexible when Parliament legislated in 2023. It was not possible to know every provision of legislation that might need to be modified as technology is developed.
Section 17 of the act , therefore allows further legislation to be added to the list of relevant enactments, which can be modified using the sandbox powers. This instrument adds a further ten enactments to the list of relevant enactments. This legislation relates to areas such as debt insurance, company law, payment services and rehabilitation of offenders. We have identified this legislation through our work to prepare for issuing the government's digital gilt instrument, or digital. These additions will allow the Digital Digital Security Sandbox, the first FMI sandbox, to operate more effectively and provide the legislative flexibility needed to enable digital to be issued through a platform operating within the digital security sandbox.
This instrument does not modify the enactment listed in this essay. It brings them within the scope of the existing FMI sandbox powers, so that necessary modifications to the digital security sandbox can be made through the sandbox framework. These modifications will be done by a further negative forces to be laid subsequent to these regulations being met. These will be targeted changes which will help the Digital Security Sandbox fulfil its intended purpose and support the delivery of digital. In conclusion, together, these instruments demonstrate a practical approach to financial services innovation, clear rules, proportionate regulation and the flexibility to address barriers as markets develop.
I hope the committee will support both instruments, and I look forward to the debate. I beg to move.
I turn first to the Financial Services and Markets Act 2000 Cryptoassets Miscellaneous Amendments Regulations 2026. As Noble Lords will know, earlier this year, the government legislated to establish a financial services regulatory regime for crypto assets, including stablecoins. That framework gives firms the certainty they need to invest and innovate in the UK, while ensuring appropriate protections for consumers and markets. The instrument before the committee today makes a number of targeted amendments to that regime. It does not replace the regime already approved by parliament, but ensures that it operates as intended, remains proportionate and supports a competitive UK market.
As this sector develops. In particular, it ensures that requirements designed for crypto asset trading do not apply disproportionately to the use of appropriately regulated, UK issued stablecoins for payments. The government considers that stablecoins issued in the UK , appropriately regulated to ensure they are truly stable, could play a significant role in both retail and wholesale payments. The government is currently consulting on wider reforms to payments regulation to accommodate tokenized payments, including stablecoins. Without these amendments, firms using UK issued qualifying stablecoins in payment chains could be captured by crypto asset regulatory activities designed primarily for trade. It would therefore be disproportionate to require firms using UK issued qualifying stablecoins in payment chains to secure permissions under the Cryptoasset regime, now only to require further permissions under the Future Payments Framework.
This instrument therefore excludes UK issued qualifying stablecoins from the crypto asset dealing and arrangement activities, arranging activities, lending and borrowing involving those stablecoins will remain regulated given the different risks those activities can present. It also excludes the temporary holding of those stablecoins in connection with a payment transaction from the crypto asset safeguarding activity. This is therefore about ensuring the right regulation applies to the right activity, rather than removing stablecoin activity from regulation. Alongside this principal change, other amendments clarify the regulatory perimeter for stablecoin issuance and backing asset arrangements. They also bring forward the commencement of provisions, clarifying that qualifying stablecoin assets are not treated as collective investment schemes or alternative investment funds, and that neither qualifying stablecoins nor the assets backing them are electronic money.
These changes are aimed at removing barriers to stablecoin adoption for different use cases ahead of the crypto asset regime coming fully into force in October 2027. Acting now provides clarity before firms need to comply with the new regime. The instruments also introduces targeted exclusions for certain proprietary trading and marketing , market making activities, technical service providers, and certain central securities depository arrangements. And finally, it makes corresponding amendments to the financial promotions regime to ensure that the perimeter remains aligned with the crypto asset regime. Following extensive engagement with parliamentarians and industry, these amendments provide greater certainty and remove unintended barriers , while retaining appropriate protections for consumers and market integrity.
My Lords, I will turn now to the Draft Financial Services and Markets Act 2023 edition of relevant Enactments regulations 2026. The Financial Services and Markets Act 2023 give the Treasury powers to establish financial market infrastructures The Financial Services and Markets Act 2023, give the Treasury powers to establish financial market infrastructures or fmi's sandboxes. These sandboxes allow new technologies to be tested in financial markets within a modified legislative framework, where requirements might otherwise impede innovation. The powers were designed to be flexible when Parliament legislated in 2023. It was not possible to know every provision of legislation that might need to be modified as technology is developed.
Section 17 of the act , therefore allows further legislation to be added to the list of relevant enactments, which can be modified using the sandbox powers. This instrument adds a further ten enactments to the list of relevant enactments. This legislation relates to areas such as debt insurance, company law, payment services and rehabilitation of offenders. We have identified this legislation through our work to prepare for issuing the government's digital gilt instrument, or digital. These additions will allow the Digital Digital Security Sandbox, the first FMI sandbox, to operate more effectively and provide the legislative flexibility needed to enable digital to be issued through a platform operating within the digital security sandbox.
This instrument does not modify the enactment listed in this essay. It brings them within the scope of the existing FMI sandbox powers, so that necessary modifications to the digital security sandbox can be made through the sandbox framework. These modifications will be done by a further negative forces to be laid subsequent to these regulations being met. These will be targeted changes which will help the Digital Security Sandbox fulfil its intended purpose and support the delivery of digital. In conclusion, together, these instruments demonstrate a practical approach to financial services innovation, clear rules, proportionate regulation and the flexibility to address barriers as markets develop.
I hope the committee will support both instruments, and I look forward to the debate. I beg to move.
12:02
12:02
Speaker 10
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Speaker 10
My Lords. I fully accept that these. These two instruments contain sensible changes to reflect the introduction in one case of stablecoin, in the other to promote innovation within the crypto sphere. That. And I don't have. I'm not going to do some a line by line analysis. I think the minister has laid out much of that. However, I do have some concerns and I will address each of the SES in turn just to reflect those areas of concern. So if I start out using the same order as the minister , with the with the Financial Services Act that deals with crypto assets, miscellaneous amendments.
My Lords, this SI exempts qualifying stablecoin from regulation related to most dealing and arranging activity. And I recognize, as the Minister pointed out, that this does not apply to general lending or borrowing, but it does remove regulation from institutional collateral and repurchase arrangements. Now, I do recognize that the word institutional is intended to show that consumers would be protected, even though that is a relaxation of lending and borrowing rules around repos and collateral. But to me, the very fact that we're making this distinction, again, between institutional and consumer in the way in which we regulate or whether there is any regulation at all, that raises, again, the whole issue of the regulatory perimeter.
My Lords, the Minibond scandal scandal of just a few years ago is a very powerful example of how bad actors manipulate around the edges of the regulatory perimeter established by the FCA to exploit people who think they are protected by FCA regulations when they are not. And it's not difficult to confuse people, because the FCA's approach means that some activities of a firm are regulated, but others carried out by exactly the same firm, but merely with a different, as it were, customer base are not, and many investors could be fooled and exploited. And I just would like the minister's comments because I am concerned the crypto industry has plenty of honest players, but it's also a magnet for the criminal, the corrupt and the inept.
And I would like a lot more assurance that this SI is not setting up this next minibond scandal, particularly around the area of repos and institutional repos and collateral, which could easily be, I think, reformed in such a way that consumers could be persuaded that they were indeed qualified and sophisticated and purchase them. And then we're back into another Woodford , that and that sequence of scandals. And I'm also mindful that the FCA, when those minibond scandals first broke, basically said nothing to do with me, guv. They're outside the perimeter. And I would like to have some assurance that the FCA is now recognising that that perimeter can't be such a hard line.
It has to have some flexibility when there is obvious abuse. So then I move to the second of the statutory instruments, which deals essentially with the sandbox. I certainly don't object to it, but again, I do have questions. I actually I recognise I'm somewhat involved that in the early days of the sandbox approach that and it's played a very important role in supporting innovation by using practical experience to get regulation right. It was first conceived of and introduced by UK financial regulators after the financial crisis, to develop an effective regulatory framework for the fintechs. And that's how I got involved in the process.
And the model indeed has been both recognised and copied around the world. This SI, however, significantly extends the scope of the sandbox. The primary weakness of the sandbox system is that the regulator picks and chooses who gets to go in when it picks out one of several small rival companies looking at approximately the same kind of innovation, it hugely advantages that entity that is chosen to go into the sandbox. Rivals suddenly find that they may struggle to get investment, and then when the regulations appear, they're very much structured around that particular sandbox experience. And so they're often very tailored to the specific company that was in the sandbox and in effect, shut out relatively close rivals.
Now, companies have not dared to complain about a lot of this publicly because they're afraid that they'll then be treated as FCA troublemakers. So how is the government going to address this issue, and how will the FCA address this issue, now that the scope is going to be very much wider drawing in? That's a many more pieces of legislation and a much bigger activity base. Secondly, what kind of oversight does Parliament have as these innovations introduced? This statutory instrument assumes permanent enactment by negative s I . The scope of the legislation essentially makes regulatory innovation subject only to regulatory decision making.
That's a direction which many of us that's in this House have raised before that. And it seems to me that this this particularly these changes double down on that concern over both scrutiny and oversight, breadth of the shift of, of, of what had previously been primary legislation now to the, to, to the regulator. That's a I mean, much of the motivation seems to be driven by the introduction of digit, a digitally native, short dated government debt instrument the government intends to issue in 2027. Well, digit depends on known technology in the form of blockchain. The risks of unexpected technology failure are.
High. Liquidity is an issue, and the system clearly lacks interoperability. Now, how is Parliament supposed to raise these issues and challenges, given the way in which essentially decision making is transferred to the regulator, who, as far as I can tell, has not provide satisfactory answers on any one of the issues that I just listed, the s. I also makes it clear that the regulator can go on to make changes which are far more sweeping than the examples. It actually discusses that in the explanatory memorandum that is attached, and I would very much like the government to address some of these concerns.
My Lords, this SI exempts qualifying stablecoin from regulation related to most dealing and arranging activity. And I recognize, as the Minister pointed out, that this does not apply to general lending or borrowing, but it does remove regulation from institutional collateral and repurchase arrangements. Now, I do recognize that the word institutional is intended to show that consumers would be protected, even though that is a relaxation of lending and borrowing rules around repos and collateral. But to me, the very fact that we're making this distinction, again, between institutional and consumer in the way in which we regulate or whether there is any regulation at all, that raises, again, the whole issue of the regulatory perimeter.
My Lords, the Minibond scandal scandal of just a few years ago is a very powerful example of how bad actors manipulate around the edges of the regulatory perimeter established by the FCA to exploit people who think they are protected by FCA regulations when they are not. And it's not difficult to confuse people, because the FCA's approach means that some activities of a firm are regulated, but others carried out by exactly the same firm, but merely with a different, as it were, customer base are not, and many investors could be fooled and exploited. And I just would like the minister's comments because I am concerned the crypto industry has plenty of honest players, but it's also a magnet for the criminal, the corrupt and the inept.
And I would like a lot more assurance that this SI is not setting up this next minibond scandal, particularly around the area of repos and institutional repos and collateral, which could easily be, I think, reformed in such a way that consumers could be persuaded that they were indeed qualified and sophisticated and purchase them. And then we're back into another Woodford , that and that sequence of scandals. And I'm also mindful that the FCA, when those minibond scandals first broke, basically said nothing to do with me, guv. They're outside the perimeter. And I would like to have some assurance that the FCA is now recognising that that perimeter can't be such a hard line.
It has to have some flexibility when there is obvious abuse. So then I move to the second of the statutory instruments, which deals essentially with the sandbox. I certainly don't object to it, but again, I do have questions. I actually I recognise I'm somewhat involved that in the early days of the sandbox approach that and it's played a very important role in supporting innovation by using practical experience to get regulation right. It was first conceived of and introduced by UK financial regulators after the financial crisis, to develop an effective regulatory framework for the fintechs. And that's how I got involved in the process.
And the model indeed has been both recognised and copied around the world. This SI, however, significantly extends the scope of the sandbox. The primary weakness of the sandbox system is that the regulator picks and chooses who gets to go in when it picks out one of several small rival companies looking at approximately the same kind of innovation, it hugely advantages that entity that is chosen to go into the sandbox. Rivals suddenly find that they may struggle to get investment, and then when the regulations appear, they're very much structured around that particular sandbox experience. And so they're often very tailored to the specific company that was in the sandbox and in effect, shut out relatively close rivals.
Now, companies have not dared to complain about a lot of this publicly because they're afraid that they'll then be treated as FCA troublemakers. So how is the government going to address this issue, and how will the FCA address this issue, now that the scope is going to be very much wider drawing in? That's a many more pieces of legislation and a much bigger activity base. Secondly, what kind of oversight does Parliament have as these innovations introduced? This statutory instrument assumes permanent enactment by negative s I . The scope of the legislation essentially makes regulatory innovation subject only to regulatory decision making.
That's a direction which many of us that's in this House have raised before that. And it seems to me that this this particularly these changes double down on that concern over both scrutiny and oversight, breadth of the shift of, of, of what had previously been primary legislation now to the, to, to the regulator. That's a I mean, much of the motivation seems to be driven by the introduction of digit, a digitally native, short dated government debt instrument the government intends to issue in 2027. Well, digit depends on known technology in the form of blockchain. The risks of unexpected technology failure are.
High. Liquidity is an issue, and the system clearly lacks interoperability. Now, how is Parliament supposed to raise these issues and challenges, given the way in which essentially decision making is transferred to the regulator, who, as far as I can tell, has not provide satisfactory answers on any one of the issues that I just listed, the s. I also makes it clear that the regulator can go on to make changes which are far more sweeping than the examples. It actually discusses that in the explanatory memorandum that is attached, and I would very much like the government to address some of these concerns.
12:09
Speaker 11
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Speaker 11
My Lords, I want to thank the noble Lord, the Minister, for introducing these two instruments, and I should begin by saying that on these benches, we welcome the steps that the government are taking to support the development and regulation of digital assets in the United Kingdom. This is an area of considerable opportunity for our financial services sector so vital to UK growth. It is important that we establish a regulatory framework which supports innovation and competition, whilst maintaining appropriate protections for consumers and the integrity of our markets. I also recognise the work being undertaken by Chris Woolard, the government's digital markets champion, in exploring the potential role of stablecoins in our financial system.
We also note the government's proposed digital gilt next year digit. As we heard it called by the noble Lord, the minister and the noble lady, Lady Cramer was right to ask about how we can follow the path of these important changes. Given that future changes would have limited parliamentary accountability. Whilst these are broadly welcome developments, I want to return to a concern which we raised repeatedly during the passage of the Financial Services and Markets Bill, your lordships House, which is the absence of a clear, coordinated strategy for the development and adoption of digital assets across our financial system.
Indeed, it was precisely this concern which motivated our amendment to the Bill. Now, clause 50, requiring the government to develop a comprehensive digital asset strategy. My Lords, the development of digital assets is taking place at considerable pace around the world. Stablecoins, tokenized securities, digital currencies and distributed ledger technologies all have the potential to transform different aspects of our financial system. But these are not isolated developments. They are increasingly interconnected components of what could become a fundamentally different financial infrastructure. And what we need from the government, therefore, is not simply a collection of individual regulatory initiatives like these, however welcome they might be.
We need a clear explanation of how these initiatives fit together, what the government ultimately want to achieve and, above all, how they will ensure that the UK remains competitive as these technologies develop internationally. The proposed digital gilt is useful in illustration of this concern. The FTT made the rather pointed observation last week that it was unclear what the exercise was actually intended to achieve, beyond demonstrating that a digital gilt could be issued. Turning specifically to the first instrument, we welcome the government's intentions to make UK issued, regulated stablecoins more practical to use for everyday payments, transfers and settlement.
The instrument rightly introduces a number of exclusions from the Regulated Activities framework, and I look forward to hearing the Minister's response to the question raised by the noble lady, Lady Cramer, about flexibility in the event of abuse. I have two areas of concern. First, if you are a potential stablecoin operator, you would be desperate to know exactly what the regulatory regime will be before you finally commit. The Treasury still hold the ring on how payment systems regulation will change and their consultation has closed. When will final decisions on the regime be taken? Second, the relatively narrow scope of today's.
See also illustrates the wider point about the need for a whole system approach. The principal payment related exclusions are focused on a particular category of stablecoin. Those issued by an appropriately authorised UK issuer. They do not extend generally to the wider range of crypto assets and other activities, including certain exchanges and custody services. They remain within the regulatory perimeter. I therefore are grateful if the Minister to explain how these measures fit within the government's broader plans for the adoption of stablecoins and digital assets, and whether the government intend to set out a more comprehensive vision for their practical application across the economy.
Turning to the second instrument, we also welcome the government's intention to provide greater flexibility for innovation through financial market infrastructure sandboxes. As I understand it, this instrument expands the range of legislation which may be modified within an FMI sandbox rather than itself, making substantive changes to those enactments. That additional flexibility is welcome, and it is right that firms should be able to test emerging technologies in an appropriate and controlled regulatory environment. I know the Financial Services Regulation Committee is conducting an inquiry into sandboxes, and I look forward to their conclusions. A fundamental question is what happens beyond the sandbox?
My Lords, it is one thing to demonstrate that a particular technology or process can work within a controlled environment. It's quite another to establish that it can operate successfully at scale within the wider financial market. There is a risk that we develop a succession of interesting pilots which demonstrate technical feasibility, but never make the transition into commercially viable, widely adopted infrastructure. For firms considering whether to commit substantial resources to these technologies, that distinction is important. I know from my own business experience that firms will only attach real commercial value to participating in such initiatives . If they can have confidence that successful innovations will have a credible route towards wider deployment and ultimately towards operating at scale.
I therefore be grateful if the minister could set out what plans the government have to support the transition from sandbox testing to full scale market operation. How will successful projects be taken forward, and what assurances can the government provide that the necessary regulatory pathways will exist to enable them to grow? I'd also be interested to hear what feedback the government have received from industry about the commercial value of these sandboxes, including the rivals who are left out. As Lady Cramer suggested, my Lords, I will conclude by reiterating that we welcome the government's efforts in both of these areas.
We want the UK to be at the forefront of financial innovation, and we recognise the importance of an effective regulatory framework in helping to achieve that important ambition. But I return to the central point. The challenge is not simply to demonstrate that these technologies can work, but to establish how they will work together, how they will be adopted at scale, and what value they will ultimately deliver to our economy and financial services sector. That is why we, and indeed many across industry, continue to believe that a comprehensive digital asset strategy is so important, and I hope the Minister will be able to offer some comfort on that point today.
We also note the government's proposed digital gilt next year digit. As we heard it called by the noble Lord, the minister and the noble lady, Lady Cramer was right to ask about how we can follow the path of these important changes. Given that future changes would have limited parliamentary accountability. Whilst these are broadly welcome developments, I want to return to a concern which we raised repeatedly during the passage of the Financial Services and Markets Bill, your lordships House, which is the absence of a clear, coordinated strategy for the development and adoption of digital assets across our financial system.
Indeed, it was precisely this concern which motivated our amendment to the Bill. Now, clause 50, requiring the government to develop a comprehensive digital asset strategy. My Lords, the development of digital assets is taking place at considerable pace around the world. Stablecoins, tokenized securities, digital currencies and distributed ledger technologies all have the potential to transform different aspects of our financial system. But these are not isolated developments. They are increasingly interconnected components of what could become a fundamentally different financial infrastructure. And what we need from the government, therefore, is not simply a collection of individual regulatory initiatives like these, however welcome they might be.
We need a clear explanation of how these initiatives fit together, what the government ultimately want to achieve and, above all, how they will ensure that the UK remains competitive as these technologies develop internationally. The proposed digital gilt is useful in illustration of this concern. The FTT made the rather pointed observation last week that it was unclear what the exercise was actually intended to achieve, beyond demonstrating that a digital gilt could be issued. Turning specifically to the first instrument, we welcome the government's intentions to make UK issued, regulated stablecoins more practical to use for everyday payments, transfers and settlement.
The instrument rightly introduces a number of exclusions from the Regulated Activities framework, and I look forward to hearing the Minister's response to the question raised by the noble lady, Lady Cramer, about flexibility in the event of abuse. I have two areas of concern. First, if you are a potential stablecoin operator, you would be desperate to know exactly what the regulatory regime will be before you finally commit. The Treasury still hold the ring on how payment systems regulation will change and their consultation has closed. When will final decisions on the regime be taken? Second, the relatively narrow scope of today's.
See also illustrates the wider point about the need for a whole system approach. The principal payment related exclusions are focused on a particular category of stablecoin. Those issued by an appropriately authorised UK issuer. They do not extend generally to the wider range of crypto assets and other activities, including certain exchanges and custody services. They remain within the regulatory perimeter. I therefore are grateful if the Minister to explain how these measures fit within the government's broader plans for the adoption of stablecoins and digital assets, and whether the government intend to set out a more comprehensive vision for their practical application across the economy.
Turning to the second instrument, we also welcome the government's intention to provide greater flexibility for innovation through financial market infrastructure sandboxes. As I understand it, this instrument expands the range of legislation which may be modified within an FMI sandbox rather than itself, making substantive changes to those enactments. That additional flexibility is welcome, and it is right that firms should be able to test emerging technologies in an appropriate and controlled regulatory environment. I know the Financial Services Regulation Committee is conducting an inquiry into sandboxes, and I look forward to their conclusions. A fundamental question is what happens beyond the sandbox?
My Lords, it is one thing to demonstrate that a particular technology or process can work within a controlled environment. It's quite another to establish that it can operate successfully at scale within the wider financial market. There is a risk that we develop a succession of interesting pilots which demonstrate technical feasibility, but never make the transition into commercially viable, widely adopted infrastructure. For firms considering whether to commit substantial resources to these technologies, that distinction is important. I know from my own business experience that firms will only attach real commercial value to participating in such initiatives . If they can have confidence that successful innovations will have a credible route towards wider deployment and ultimately towards operating at scale.
I therefore be grateful if the minister could set out what plans the government have to support the transition from sandbox testing to full scale market operation. How will successful projects be taken forward, and what assurances can the government provide that the necessary regulatory pathways will exist to enable them to grow? I'd also be interested to hear what feedback the government have received from industry about the commercial value of these sandboxes, including the rivals who are left out. As Lady Cramer suggested, my Lords, I will conclude by reiterating that we welcome the government's efforts in both of these areas.
We want the UK to be at the forefront of financial innovation, and we recognise the importance of an effective regulatory framework in helping to achieve that important ambition. But I return to the central point. The challenge is not simply to demonstrate that these technologies can work, but to establish how they will work together, how they will be adopted at scale, and what value they will ultimately deliver to our economy and financial services sector. That is why we, and indeed many across industry, continue to believe that a comprehensive digital asset strategy is so important, and I hope the Minister will be able to offer some comfort on that point today.
12:16
Speaker 1
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Speaker 1
Noble Baroness, for those remarks and those numerous questions, I hope I can get to all of them and answer them, at least adequately. I think both Baroness has made a general point about kind of policy on on digital asset or digital asset policy. I mean, the government has a substantial programme of work under the wholesale financial markets digital strategy, including legislation, regulation and industry co-ordination. Specific initiatives such as the Digital Security sandbox and the digital gilt instrument, or digital crypto asset regulatory framework and payments reform complement work, with work being taken forward by the regulators and the sector.
In Chris Woolard, who has been the wholesale digital market champion, is leading industry's work through nine task force action groups and published his first report back in July. And I think it's also fair to say that there's been sort of cross-party consultation on this and with the with the industry. And I think the part about taking stablecoins for making them for payments, not just for general assets, was something that the noble Baroness Neville-rolfe raised when we discussed this back in February. I seem to remember. So it is something that we all. We essentially just want to get right because it is so technical and it is so important to for the economy as well.
To ask to answer Baroness Cramer's point about FCA oversight and Minibond scandal, for example, the government considers this the right. The approach we take and the right. The right one and the most appropriate in UK issued stablecoins will remain subject to high regulatory standards and other requirements continue to apply, and the issues that the noble Baroness made on repo and collateral. I think I'll probably write to the noble Baroness on those points. The. On the digital sandbox that was mentioned, the digital security sandbox allows both incumbents and new entrants to come into it. Okay. At the moment, I think it's 17.
They've gone through the first gateway and these three that are actually in the sandbox now that are in the position to.
In Chris Woolard, who has been the wholesale digital market champion, is leading industry's work through nine task force action groups and published his first report back in July. And I think it's also fair to say that there's been sort of cross-party consultation on this and with the with the industry. And I think the part about taking stablecoins for making them for payments, not just for general assets, was something that the noble Baroness Neville-rolfe raised when we discussed this back in February. I seem to remember. So it is something that we all. We essentially just want to get right because it is so technical and it is so important to for the economy as well.
To ask to answer Baroness Cramer's point about FCA oversight and Minibond scandal, for example, the government considers this the right. The approach we take and the right. The right one and the most appropriate in UK issued stablecoins will remain subject to high regulatory standards and other requirements continue to apply, and the issues that the noble Baroness made on repo and collateral. I think I'll probably write to the noble Baroness on those points. The. On the digital sandbox that was mentioned, the digital security sandbox allows both incumbents and new entrants to come into it. Okay. At the moment, I think it's 17.
They've gone through the first gateway and these three that are actually in the sandbox now that are in the position to.
12:19
12:19
12:19
12:19
Speaker 1
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Speaker 1
Well, we can write to the noble Baroness on that. But what I do know is that that people are or organisations are applying to, to, to go into it. So it's obviously something that's being used and something that the industry sees as being is very important. And we just, as I've said, need to get this right. Further. Affirmative voices are needed if needed. Permanent changes from the from these debates will, will obviously be will come forward in the in the future if they are required. And as you move. And UK issued stablecoins from these activities create a gap in consumer protection before the new payments regime is introduced.
It's true that certain UK stablecoin transactions that would have fallen from the crypto regime will now remain unregulated until the payment reforms are implemented. However, the government considers that this is the right approach and is more proportionate than requiring stablecoin payments to obtain crypto permissions now only to seek different permissions under the future payments framework. This does not mean stablecoins will be removed from regulation. Stablecoins issued in the UK will remain subject to high regulatory standards, as I have already said, and firms remain subject to other applicable regulations. To move on to some of the points that Baroness Neville-rolfe has made.
I mean, on the whole issue of digital government, it's is itself helping to demonstrate the technology through the digital digital gilt instrument. Digit will be a new digitally native UK government debt instrument issue issued on on DLT with the with the DSS. The pilot is intended both to test DLT across sovereign debt issuance and to catalyse development of UK digital market infrastructure, and the first transaction is expected in the first quarter of next year. Baroness Neville Rolfe also asked what is basically what the government's plans for stablecoin. Stablecoin has potential to have a significant role in both retail and wholesale payments.
We're already seeing the benefits stablecoin can provide in cross border payments, reducing costs and improving efficiency. The government also recognises that unlocking the full trance, the full transformative potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving. This will therefore be important for the UK to harness these opportunities in promotion of the on going competitiveness of UK financial services, the crypto s I is explicitly there to support a competitive UK regime by removing barriers while retaining appropriate regulation. Nevertheless, the government said assets and digital assets.
The government is a strong supporter of digital assets and sees them as a key strategic priority. The government is actively taking forward action actions set out in the Wholesale Financial Markets digital Strategy in July 2025. It has appointed Chris Woolard as we know, and there are many other actions being taken by the support to support this work, such as the Bank of England and Financial Conduct Authority, to offer input on tokenization, which closed in July. The intent to publish a further roadmap soon. The government has also made substantial progress on the digital security sandbox and the digital gilt instrument, and I think it is fair to say that we have taken this.
The government's taking this very seriously. We see the opposition's role in this, especially with stablecoin coin and the efficiencies that can make, obviously. Parliamentary regime. And all of this is is very in consultation is very important. And it avoids the the crypto asset avoids duplicative requirements for UK stablecoin payment activity ahead of wider payment reform, ensuring that requirements designed for crypto asset trading do not apply disproportionately to stablecoins used for payments. While regulation is retained. Where the risk is justly is justified, and for the sandbox, these regulations make targeted additions to the legislation within scope of the FMI sandbox powers.
This is needed because barriers to innovate cannot always be identified in advance, and the changes will ultimately allow the digital security sandbox to operate more effectively and in particular, provide the flexibility necessary to support the issuance of digital through a platform participating in the sandbox. So in conclusion, these are proportionate measures that support innovation in financial services while maintaining appropriate protections to ensure that regulation is targeted at the risk presented and that our frameworks can adopt as a market and technology development. And I commend both instruments to the committee, and I beg to move.
It's true that certain UK stablecoin transactions that would have fallen from the crypto regime will now remain unregulated until the payment reforms are implemented. However, the government considers that this is the right approach and is more proportionate than requiring stablecoin payments to obtain crypto permissions now only to seek different permissions under the future payments framework. This does not mean stablecoins will be removed from regulation. Stablecoins issued in the UK will remain subject to high regulatory standards, as I have already said, and firms remain subject to other applicable regulations. To move on to some of the points that Baroness Neville-rolfe has made.
I mean, on the whole issue of digital government, it's is itself helping to demonstrate the technology through the digital digital gilt instrument. Digit will be a new digitally native UK government debt instrument issue issued on on DLT with the with the DSS. The pilot is intended both to test DLT across sovereign debt issuance and to catalyse development of UK digital market infrastructure, and the first transaction is expected in the first quarter of next year. Baroness Neville Rolfe also asked what is basically what the government's plans for stablecoin. Stablecoin has potential to have a significant role in both retail and wholesale payments.
We're already seeing the benefits stablecoin can provide in cross border payments, reducing costs and improving efficiency. The government also recognises that unlocking the full trance, the full transformative potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving. This will therefore be important for the UK to harness these opportunities in promotion of the on going competitiveness of UK financial services, the crypto s I is explicitly there to support a competitive UK regime by removing barriers while retaining appropriate regulation. Nevertheless, the government said assets and digital assets.
The government is a strong supporter of digital assets and sees them as a key strategic priority. The government is actively taking forward action actions set out in the Wholesale Financial Markets digital Strategy in July 2025. It has appointed Chris Woolard as we know, and there are many other actions being taken by the support to support this work, such as the Bank of England and Financial Conduct Authority, to offer input on tokenization, which closed in July. The intent to publish a further roadmap soon. The government has also made substantial progress on the digital security sandbox and the digital gilt instrument, and I think it is fair to say that we have taken this.
The government's taking this very seriously. We see the opposition's role in this, especially with stablecoin coin and the efficiencies that can make, obviously. Parliamentary regime. And all of this is is very in consultation is very important. And it avoids the the crypto asset avoids duplicative requirements for UK stablecoin payment activity ahead of wider payment reform, ensuring that requirements designed for crypto asset trading do not apply disproportionately to stablecoins used for payments. While regulation is retained. Where the risk is justly is justified, and for the sandbox, these regulations make targeted additions to the legislation within scope of the FMI sandbox powers.
This is needed because barriers to innovate cannot always be identified in advance, and the changes will ultimately allow the digital security sandbox to operate more effectively and in particular, provide the flexibility necessary to support the issuance of digital through a platform participating in the sandbox. So in conclusion, these are proportionate measures that support innovation in financial services while maintaining appropriate protections to ensure that regulation is targeted at the risk presented and that our frameworks can adopt as a market and technology development. And I commend both instruments to the committee, and I beg to move.
12:25
12:25
Speaker 1
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Speaker 1
I'm sure that we can we can arrange that when it when it's published. And obviously, what we need to ensure is that we have. Because it is such a technical issue that we do have expertise from all over the place to take to take, you know, to, to keep us on board with what is actually happening in this field. So I take on board what the noble baroness is saying.
12:25
Speaker 9
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Speaker 9
My Lords, firstly, regarding the Financial Services and Markets Act, 2000 Crypto Assets Miscellaneous Amendments Regulations 2026, the question is that the Grand Committee has considered this instrument. As many as of that opinion will say content. Content contrary, not content. The contents have it. And now, regarding the Financial Services and Markets Act 2023, addition of Relevant Enactments regulations 2026, Lord Wilson formally.
12:26
12:26
Speaker 9
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Speaker 9
The question is that the Grand Committee has considered this instrument. As many as that opinion will say content, content. The contrary, not content. The contents have it, my Lords, there'll be a slight pause while the frontbench is refreshed. International Claims Commission for Ukraine Immunities and Privileges Order 2026. Lord Wood of Anfield.
12:27
Speaker 12
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Speaker 12
My Lord, I beg to move that the committee has considered the International Claims Commission for Ukraine Immunities and Privileges Order 2026. This order is required before the UK can ratify the convention establishing an International Claims Commission for Ukraine. The UK signed the convention Lords remember on 16th December 2025. The International Claims Commission builds upon the Register of Damage for Ukraine, established two years earlier in 2023, which collects and records claims from individuals, organisations and public bodies in Ukraine for damage, loss and injury inflicted by Russia. Once the commission has been established, the Register and its work will be transferred to the commission.
The Commission will review, assess and decide upon claims recorded in the register, as well as subsequent claims, and determine the amount of compensation due in each case. The convention requires participating states to confer specified privileges, privileges and immunities on the Commission and on persons connected with its work to enable them to perform their functions independently and effectively. And that's what this order is about. It gives effect to those requirements in UK law. By ratifying the convention, the UK will support the principle that Russia must pay for the damage it has caused and help establish a credible international process for assessing claims and delivering justice for Ukraine.
This is about more than compensation. It is part of the UK's wider commitment to stand with Ukraine for the long term, a commitment shared by both this government and the previous conservative government, and to ensure that Russia is held accountable for the consequences of its aggression. There can be no just and lasting peace without justice and accountability, and the Claims Commission is an important step towards ensuring that those who have suffered loss, injury and damage have a credible route to redress. This order was laid in draft before Parliament on the 14th of September 2026 under section ten of the International Organisations Act 1968.
It is subject to the affirmative procedure and, if approved by both houses, will be made by His Majesty in Council under section one of that act. This order grants the International Claims Commission the. For Ukraine the privileges and immunities it functionally requires so that it may operate effectively. Doing so is a prerequisite so that the UK can ratify the Commission's treaty. However, we do not expect many of these privileges and immunities to be used in the UK. The Commission will not be based in the UK. Visits of its staff to the UK are envisaged, envisaged to be limited and no visits are being planned right now.
The privileges and immunities within this order are limited to what the Commission and the persons connected with its work functionally require to perform their roles independently and effectively. The Commission will have legal capacity and immunity from suit and legal process. Its archives will be inviolable. Additionally, its premises would be also inviolable if it were to occupy any in the United Kingdom. The order also confers specific privileges and immunities on representatives of other member states of the Commission, the commissioners, the Executive Director, members of the Secretariat, and experts engaged by the Commission. These include immunity in respect of official words and acts.
No individuals will receive a full set of so-called personal or diplomatic immunities. These privileges and immunities are granted to ensure the independent and effective functioning of the Commission. They are not for personal benefit. The convention and this order contain a clear waiver so that a privilege or immunity may be waived by the appropriate authority. For example, the Secretary General of the Council of Europe may waive immunities for the Executive Director of the Commission if requested by a Member State. The order also expressly removes immunity in relation to road traffic offences and civil claims arising from motor vehicle accidents.
The government considers these privileges and immunities necessary and appropriate. They deliver on the UK's interests and the commitments it has made towards the Commission. They are in line with UK precedents across different cases. Chair, to conclude, the support for the International Claims Commission for Ukraine ensures that those who have suffered are compensated. We have stood with Ukraine throughout Russia's illegal invasion. We will continue to stand with the Ukrainian people as they defend their country and help build a secure, sovereign and prosperous future. Through the Commission, we can strengthen our support for Ukraine, work hand in hand with international community to advance accountability and help ensure that Russia ultimately pays for the damage it has caused, laying the foundations for a just and lasting peace.
I commend the order to the committee.
The Commission will review, assess and decide upon claims recorded in the register, as well as subsequent claims, and determine the amount of compensation due in each case. The convention requires participating states to confer specified privileges, privileges and immunities on the Commission and on persons connected with its work to enable them to perform their functions independently and effectively. And that's what this order is about. It gives effect to those requirements in UK law. By ratifying the convention, the UK will support the principle that Russia must pay for the damage it has caused and help establish a credible international process for assessing claims and delivering justice for Ukraine.
This is about more than compensation. It is part of the UK's wider commitment to stand with Ukraine for the long term, a commitment shared by both this government and the previous conservative government, and to ensure that Russia is held accountable for the consequences of its aggression. There can be no just and lasting peace without justice and accountability, and the Claims Commission is an important step towards ensuring that those who have suffered loss, injury and damage have a credible route to redress. This order was laid in draft before Parliament on the 14th of September 2026 under section ten of the International Organisations Act 1968.
It is subject to the affirmative procedure and, if approved by both houses, will be made by His Majesty in Council under section one of that act. This order grants the International Claims Commission the. For Ukraine the privileges and immunities it functionally requires so that it may operate effectively. Doing so is a prerequisite so that the UK can ratify the Commission's treaty. However, we do not expect many of these privileges and immunities to be used in the UK. The Commission will not be based in the UK. Visits of its staff to the UK are envisaged, envisaged to be limited and no visits are being planned right now.
The privileges and immunities within this order are limited to what the Commission and the persons connected with its work functionally require to perform their roles independently and effectively. The Commission will have legal capacity and immunity from suit and legal process. Its archives will be inviolable. Additionally, its premises would be also inviolable if it were to occupy any in the United Kingdom. The order also confers specific privileges and immunities on representatives of other member states of the Commission, the commissioners, the Executive Director, members of the Secretariat, and experts engaged by the Commission. These include immunity in respect of official words and acts.
No individuals will receive a full set of so-called personal or diplomatic immunities. These privileges and immunities are granted to ensure the independent and effective functioning of the Commission. They are not for personal benefit. The convention and this order contain a clear waiver so that a privilege or immunity may be waived by the appropriate authority. For example, the Secretary General of the Council of Europe may waive immunities for the Executive Director of the Commission if requested by a Member State. The order also expressly removes immunity in relation to road traffic offences and civil claims arising from motor vehicle accidents.
The government considers these privileges and immunities necessary and appropriate. They deliver on the UK's interests and the commitments it has made towards the Commission. They are in line with UK precedents across different cases. Chair, to conclude, the support for the International Claims Commission for Ukraine ensures that those who have suffered are compensated. We have stood with Ukraine throughout Russia's illegal invasion. We will continue to stand with the Ukrainian people as they defend their country and help build a secure, sovereign and prosperous future. Through the Commission, we can strengthen our support for Ukraine, work hand in hand with international community to advance accountability and help ensure that Russia ultimately pays for the damage it has caused, laying the foundations for a just and lasting peace.
I commend the order to the committee.
12:32
12:32
Speaker 13
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Speaker 13
My Lords, I thank the Minister for this introduction. We, of course, debated this. I think it was in June, and this is the next step in its implementation, and I think it's welcomed on all sides. As the minister said, it is an instrument of the Council of Europe, and I've got just a few questions for him. One is this obviously takes us further down the road. Has the commission actually started work, or when is it likely to be starting work ? On the issue of the. No plans to visit the UK and whatever plans might happen in the future are limited, is understood and accepted.
But presumably there is a possibility, for example, that members of the Commission may wish to interview Ukrainian exiles in the UK in order to get evidence for assessing damages. So again, it would be just interesting to to clarify, that would be the case. Certainly one wouldn't want to obstruct such a process. I'd also say that we're basing this against the backdrop of current meetings between Russia and the United States, which I think are quite concerning, to be absolutely honest about what seems to be being discussed, which comes pretty close to something like persuading the Ukrainians to surrender, which I know is not the UK's policy, apart from a few fringe people in the political arena.
But all of the official parties are strongly supportive of Ukraine. But I wonder if I can test the Minister of Little, and I know it's hypothetical, so no doubt he will use that as a defence. But the concern I. Seems to me that, as President Zelensky has said, he's worried that we may be facing a new Yalta, a situation where the great powers carved up Europe without much resistance to the people who were directly affected by it. That is, obviously President Zelensky is concerned. People can recognise that the brave people of Ukraine are war weary and exhausted, and would welcome peace but not peace at any price.
And so my question to the minister is, are we involved in these negotiations? What extent does Britain have the opportunity to influence the outcome and to ensure that the interests of Ukraine, and indeed the wider interests of Europe are fully appreciated? Because one of the concerns I think many of us have has is a degree of ignorance and carelessness within the American administration, indeed a wider American political society to regard Europe as some sort of faraway place that really doesn't affect them very much, but it affects us very much, and it's really not acceptable that it should be carved up by outsiders who are not party to this.
So I hope the minister will understand the concerns we have on the specifics of the Commission. I think I remember from the last debate the seized Russian assets add up to about half of the assessed damages or liabilities at that time. Is that still the case? Can we be sure that that is the best case for ensuring those assets are not returned to Russia, but are used for these purposes? But also the other half is still an obligation on Russia at the time of reconstruction. I on a very minor detail, but important one, the fact that the Commission does not allow road traffic offences to be given immunity.
I think we realise from past experience that that is important because we've had some concerning uses of or misuses of immunity in the past. So I think I just want to acknowledge that we are grateful that that's happened, and also to accord the fact that the devolved administrations have said that those aspects of the commission's activities, which are devolved, will be subjected to separate legislation, which is, I understand, in hand. So the conclusion to what I have to say is I welcome that this next this development timetabling would be interesting, would be of interest and obviously assurances that that it will actually happen and that we will not be left to a situation where outsiders effectively negate its its efficiency.
I suppose I should just say as a party interest. I was many years ago, for several years a member of the Parliamentary Assembly of the Council of Europe, an organisation for which I have huge admiration and was very, very grateful to be part of. And it continues to produce really valuable initiatives and support democracy and human rights, perhaps more vigorously than any other institution in Europe. And I just say, I hope that the United Kingdom will continue to be a fully and active participating member of the Council of Europe. And just a very small aside to the conservative frontbench, I am concerned that the conservatives are going down a path which could lead to Britain's withdrawal from the Council of Europe if we were not to.
Or if we were to withdraw from the European Convention of Human Rights because support for the European Convention of Human Rights is a precondition of membership of the Council of Europe. I hope that isn't going to be the case, but I can't really leave it without saying it is a concern.
But presumably there is a possibility, for example, that members of the Commission may wish to interview Ukrainian exiles in the UK in order to get evidence for assessing damages. So again, it would be just interesting to to clarify, that would be the case. Certainly one wouldn't want to obstruct such a process. I'd also say that we're basing this against the backdrop of current meetings between Russia and the United States, which I think are quite concerning, to be absolutely honest about what seems to be being discussed, which comes pretty close to something like persuading the Ukrainians to surrender, which I know is not the UK's policy, apart from a few fringe people in the political arena.
But all of the official parties are strongly supportive of Ukraine. But I wonder if I can test the Minister of Little, and I know it's hypothetical, so no doubt he will use that as a defence. But the concern I. Seems to me that, as President Zelensky has said, he's worried that we may be facing a new Yalta, a situation where the great powers carved up Europe without much resistance to the people who were directly affected by it. That is, obviously President Zelensky is concerned. People can recognise that the brave people of Ukraine are war weary and exhausted, and would welcome peace but not peace at any price.
And so my question to the minister is, are we involved in these negotiations? What extent does Britain have the opportunity to influence the outcome and to ensure that the interests of Ukraine, and indeed the wider interests of Europe are fully appreciated? Because one of the concerns I think many of us have has is a degree of ignorance and carelessness within the American administration, indeed a wider American political society to regard Europe as some sort of faraway place that really doesn't affect them very much, but it affects us very much, and it's really not acceptable that it should be carved up by outsiders who are not party to this.
So I hope the minister will understand the concerns we have on the specifics of the Commission. I think I remember from the last debate the seized Russian assets add up to about half of the assessed damages or liabilities at that time. Is that still the case? Can we be sure that that is the best case for ensuring those assets are not returned to Russia, but are used for these purposes? But also the other half is still an obligation on Russia at the time of reconstruction. I on a very minor detail, but important one, the fact that the Commission does not allow road traffic offences to be given immunity.
I think we realise from past experience that that is important because we've had some concerning uses of or misuses of immunity in the past. So I think I just want to acknowledge that we are grateful that that's happened, and also to accord the fact that the devolved administrations have said that those aspects of the commission's activities, which are devolved, will be subjected to separate legislation, which is, I understand, in hand. So the conclusion to what I have to say is I welcome that this next this development timetabling would be interesting, would be of interest and obviously assurances that that it will actually happen and that we will not be left to a situation where outsiders effectively negate its its efficiency.
I suppose I should just say as a party interest. I was many years ago, for several years a member of the Parliamentary Assembly of the Council of Europe, an organisation for which I have huge admiration and was very, very grateful to be part of. And it continues to produce really valuable initiatives and support democracy and human rights, perhaps more vigorously than any other institution in Europe. And I just say, I hope that the United Kingdom will continue to be a fully and active participating member of the Council of Europe. And just a very small aside to the conservative frontbench, I am concerned that the conservatives are going down a path which could lead to Britain's withdrawal from the Council of Europe if we were not to.
Or if we were to withdraw from the European Convention of Human Rights because support for the European Convention of Human Rights is a precondition of membership of the Council of Europe. I hope that isn't going to be the case, but I can't really leave it without saying it is a concern.
12:38
Speaker 5
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Speaker 5
My Lords, I'd like to thank the noble, the Minister, for going through this debate on the International Claims Commission and, as he said, the order gives effect to the privileges and immunities required by the convention establishing the International Claims Commission for Ukraine Immunities and Privileges Order. We, as the noble Lord, Lord Bruce, said we debated this the convention in detail in June of this year, and I'll not be. Detain the Committee with a rerun of the detailed debate that was held on that occasion, however, there were some points that my noble friend Lord Callanan raised in that debate that remain relevant.
So I hope the noble Lord, the minister, will be able to provide an update on them. Firstly, my Lords, on the question of Russia's liability for the cost of the Commission, can the noble Lord the minister, say what assessment the government have made of the total likely cost to the UK of the Commission, should Russia never join it? My Lords, in addition, as a noble Lord, Lord Bruce touched on this area. But can he say what our government's latest position is on the use of frozen Russian assets to support to support Ukraine? And I also don't think that the noble or the minister's predecessor answered the point in that debate on including compensation for Russian actions between 2014 and 2022, when we debated the Commission last time.
Perhaps I can press the noble Lord, the Minister, for an answer on that today. The noble Lord, Lord Bruce sir, mentioned the position relating to my party on the. The Conservative Party would leave the UK. This is a policy that has been considered in detail and it has been set out in full. We would, of course, continue our full throated support for Ukraine outside the HR, and I see no reason why leaving the A should prevent us from backing efforts to ensure Ukrainians who have suffered such loss as a result of Putin's illegal war get the compensation they deserve.
We are.
So I hope the noble Lord, the minister, will be able to provide an update on them. Firstly, my Lords, on the question of Russia's liability for the cost of the Commission, can the noble Lord the minister, say what assessment the government have made of the total likely cost to the UK of the Commission, should Russia never join it? My Lords, in addition, as a noble Lord, Lord Bruce touched on this area. But can he say what our government's latest position is on the use of frozen Russian assets to support to support Ukraine? And I also don't think that the noble or the minister's predecessor answered the point in that debate on including compensation for Russian actions between 2014 and 2022, when we debated the Commission last time.
Perhaps I can press the noble Lord, the Minister, for an answer on that today. The noble Lord, Lord Bruce sir, mentioned the position relating to my party on the. The Conservative Party would leave the UK. This is a policy that has been considered in detail and it has been set out in full. We would, of course, continue our full throated support for Ukraine outside the HR, and I see no reason why leaving the A should prevent us from backing efforts to ensure Ukrainians who have suffered such loss as a result of Putin's illegal war get the compensation they deserve.
We are.
12:40
Speaker 13
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Speaker 13
I wonder if you allow me. I'm grateful for that, but I wonder if I can just get clarification, because leaving the Echr means leaving the Council of Europe. There are only two countries in Europe that are not members of the Council of Europe. They are Russia and Ukraine. So is the Conservative Party position that UK is going to be the third one?
12:40
Speaker 5
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Speaker 5
I think I'll probably leave it as it is. I've already said, to be perfectly honest, but in winding up my Lords. We are steadfast in our support for Ukraine and we will support the government when it is doing the right thing by our Ukrainian partners who have suffered so terrible at the hands of Vladimir Putin.
12:41
Speaker 12
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Speaker 12
I'm grateful to the noble Lord, Lord Bruce and noble Lord Courtown for their contributions. And I'll just try and quickly answer the questions and Lord Bruce asked noble Lord. Lord Bruce asked whether the Commission started work. No, it hasn't started work yet. The register of damages has been is in the process of being compiled, has been compiled, and the process is that countries like the UK have to confirm. The convention. And this is an S I. In order for us to be doing that, I think we anticipate I'm looking at my officials early next year that that will be ratified, and other countries have to do the same.
And then the process of beginning an administrative body to do the work begins on that. So the register of damages is the essential prerequisite for this is in train well in train, but. Not the Claims Commission itself. The noble Lord, Lord Bruce, also asked about whether the Claims Commission would want to do interviews in the UK. It's quite possible I couldn't. I couldn't foresee the future, but these privileges and immunities are the standard way in which members and officials and functionaries of the Commission would work, consistent with the commitments we have and consistent with the behaviour we expect.
Noble Lord, Lord Bruce also asked me to become a CNN pundit on the on the Abu Dhabi talks. I do feel like a CNN pundit on this one. We have we have Jonathan Powell, the national security advisor. My friend and colleague is is in Abu Dhabi for today. And tomorrow he will be in the in the vicinity of the conversations. We're fortunate in having him as national security advisor with extremely close connections to the National Security Advisor Network and to the American representatives. So yes, we I'm pleased to say we have we have some we have some engagement on this process.
Noble Lord is also right to say that there are a number of different initiatives. The Finnish and Norwegian leaders recently had a call, I believe, with Vladimir Putin. And there's uncertainty about what will what will happen next. My personal view is I live in hope that there is a breakthrough in Abu Dhabi. My expectations are are governed by a series of false dawns when the Russian position, sadly, has not changed. And to go back to the noble Lord, Lord Bruce's point about security. I completely agree that a precondition. There are lots of questions about the future of European security that need to be answered, but a cease fire has to be in place first before any of these other issues are addressed and their address collectively, and that ceasefire should be achieved as soon as possible.
Both the noble Lords Lords raise the issue of Russian sovereign assets. Our position is Russia should compensate Ukraine for its internationally wrongful acts. It must fund the cost of the reparations mechanisms until Russia agrees to do so. The operational cost, just the operational costs of the Claims Commission, will be covered by its member States from the point at which the organization is established. So the UK, as a member will contribute to these operational costs. The precise amount will depend on the agreed funding arrangements between members, which is yet to be decided on the cost of compensation.
Russia bears responsibility under international law. We make no apology to insist on a very strong principle that they must compensate Ukraine for the damage they have caused. We're under no illusion about the difficulty of enforcement of this when the time comes, but it is a firm commitment on our part that accountability, the principle of compensation, requires this, and we remain open to different innovative legal and financial approaches to ensure that Ukraine receives the reparations that it deserves. I thank the noble Lord, Lord Bruce, for his support on the issue of privileges and immunities and the way we've accommodated concerns on road traffic incidents, and we all agree that that is an important part of this.
And I can confirm that the Scotland will have its own. The Scottish Parliament will have its own separate process on on this on this committee. I also want to thank noble Lord, Lord Bruce for his comments about the Council of Europe. And I completely agree. I'm a strong supporter of the Council of Europe. This government is as it is for the OSCE and other multilateral institutions that some of which have Russia at the table. Interestingly, it's an important part of security. I have to say. We had we've had a decade or so in which multilateral institutions have not had a very.
Fair wind and have had a very strong influence on some of the major crises. And I think we look to play a part in restoring that. And the Council of Europe's strong work is an important part of that as well. I think I've answered some of the questions and I would cortown but just to recap, there are negligible costs involved in the setting up of the Commission. Rather, this see doesn't involve costs necessarily of any magnitude because the Commission is not based in the UK and its privileges and immunities will be managed through existing resources.
The question of the administrative costs will be decided by member states down the line. I think that's everything covered. I hope so, and I know that committee. I know I appreciate the keen interest that noble Lords have in this claims Commission and the cross-party consensus on it, and approval of this draft order is an important part of completing the domestic process before we can ratify the convention, and when we do so, we'll be better positioned to support Ukraine, stand with our partners in the pursuit of accountability for Russia's unlawful, brutal invasion in February 2022. I therefore trust the committee to support the order.
And then the process of beginning an administrative body to do the work begins on that. So the register of damages is the essential prerequisite for this is in train well in train, but. Not the Claims Commission itself. The noble Lord, Lord Bruce, also asked about whether the Claims Commission would want to do interviews in the UK. It's quite possible I couldn't. I couldn't foresee the future, but these privileges and immunities are the standard way in which members and officials and functionaries of the Commission would work, consistent with the commitments we have and consistent with the behaviour we expect.
Noble Lord, Lord Bruce also asked me to become a CNN pundit on the on the Abu Dhabi talks. I do feel like a CNN pundit on this one. We have we have Jonathan Powell, the national security advisor. My friend and colleague is is in Abu Dhabi for today. And tomorrow he will be in the in the vicinity of the conversations. We're fortunate in having him as national security advisor with extremely close connections to the National Security Advisor Network and to the American representatives. So yes, we I'm pleased to say we have we have some we have some engagement on this process.
Noble Lord is also right to say that there are a number of different initiatives. The Finnish and Norwegian leaders recently had a call, I believe, with Vladimir Putin. And there's uncertainty about what will what will happen next. My personal view is I live in hope that there is a breakthrough in Abu Dhabi. My expectations are are governed by a series of false dawns when the Russian position, sadly, has not changed. And to go back to the noble Lord, Lord Bruce's point about security. I completely agree that a precondition. There are lots of questions about the future of European security that need to be answered, but a cease fire has to be in place first before any of these other issues are addressed and their address collectively, and that ceasefire should be achieved as soon as possible.
Both the noble Lords Lords raise the issue of Russian sovereign assets. Our position is Russia should compensate Ukraine for its internationally wrongful acts. It must fund the cost of the reparations mechanisms until Russia agrees to do so. The operational cost, just the operational costs of the Claims Commission, will be covered by its member States from the point at which the organization is established. So the UK, as a member will contribute to these operational costs. The precise amount will depend on the agreed funding arrangements between members, which is yet to be decided on the cost of compensation.
Russia bears responsibility under international law. We make no apology to insist on a very strong principle that they must compensate Ukraine for the damage they have caused. We're under no illusion about the difficulty of enforcement of this when the time comes, but it is a firm commitment on our part that accountability, the principle of compensation, requires this, and we remain open to different innovative legal and financial approaches to ensure that Ukraine receives the reparations that it deserves. I thank the noble Lord, Lord Bruce, for his support on the issue of privileges and immunities and the way we've accommodated concerns on road traffic incidents, and we all agree that that is an important part of this.
And I can confirm that the Scotland will have its own. The Scottish Parliament will have its own separate process on on this on this committee. I also want to thank noble Lord, Lord Bruce for his comments about the Council of Europe. And I completely agree. I'm a strong supporter of the Council of Europe. This government is as it is for the OSCE and other multilateral institutions that some of which have Russia at the table. Interestingly, it's an important part of security. I have to say. We had we've had a decade or so in which multilateral institutions have not had a very.
Fair wind and have had a very strong influence on some of the major crises. And I think we look to play a part in restoring that. And the Council of Europe's strong work is an important part of that as well. I think I've answered some of the questions and I would cortown but just to recap, there are negligible costs involved in the setting up of the Commission. Rather, this see doesn't involve costs necessarily of any magnitude because the Commission is not based in the UK and its privileges and immunities will be managed through existing resources.
The question of the administrative costs will be decided by member states down the line. I think that's everything covered. I hope so, and I know that committee. I know I appreciate the keen interest that noble Lords have in this claims Commission and the cross-party consensus on it, and approval of this draft order is an important part of completing the domestic process before we can ratify the convention, and when we do so, we'll be better positioned to support Ukraine, stand with our partners in the pursuit of accountability for Russia's unlawful, brutal invasion in February 2022. I therefore trust the committee to support the order.